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The European Central Bank will reassess its interest rate policy this fall, weighing whether additional cuts are necessary after a recent series of reductions brought its main rate to 2%, with inflation easing to 1.9%.
At its next meeting in July, the ECB is expected to maintain its current wait-and-see approach. Officials have emphasized that the bank's primary goal remains reaching what it considers the "neutral rate" of 2%.
Several factors are likely to influence the ECB’s decision after its summer pause, including trade talks between the European Union and the United States over tariffs announced by President Donald Trump. The ECB is closely watching how high the tariffs on European products will go and what impact they could have on the continent’s economy.
The eurozone economy grew by 0.6% in the first quarter, better than expected, but growth remains sluggish and exposed to global uncertainties. Geopolitical tensions and economic instability continue to pose risks that could undermine the recovery.
In that context, significant U.S. tariffs could weigh heavily on Europe’s economy, potentially prompting the ECB to consider further rate cuts to support growth.
Inflation remains in check. Eurostat reported a decline in the annual rate to 1.9% in May, down from 2.2% in April, giving the ECB more flexibility to hold off on immediate further easing. Projections indicate inflation may continue to decline in the coming months.
Global bond markets are also expected to play a key role in shaping the ECB’s decisions. A shift by major investment funds away from U.S. bonds, driven by concerns over America’s fiscal outlook, is drawing more attention to European assets. The U.S. budget deficit, currently at 6.5% of GDP, has led to a sharp increase in public debt, raising alarms among investors and triggering volatility in bond markets.
The ECB will be closely monitoring how these developments affect European bond yields and investor sentiment, as they could heavily influence monetary policy decisions in the fall.
With information from Skai.gr.
