Disinflation drives ECB rate cut but investors warn of limited space for further trims

25bps cut

The European Central Bank (ECB) has cut interest rates by 25 basis points to 2% in a move widely expected by markets, with some investors now pricing one “extra cut” in 2025.

At its meeting today (5 June), the Bank's Governing Council noted the recent decline in eurozone inflation and said that while it was currently at 1.9%, it forecast overall 2025 inflation to average out at its 2% target before falling to 1.6% in 2026 and rising again to 2% in 2027.  The Big Question: Do you trust central banks to make the right interest rate calls this year? This marked ECB's eight rate cut since June 2024, and the central bank said a further escalation of trade tensions over the coming months could lead to growth and inflation "below the baseline projections". ...