Published by Global Banking & Finance Review®
Posted on May 29, 2025
3 min readLast updated: January 23, 2026
Add as preferred source on GoogleThe ECB is expected to cut rates on June 5, pausing in July as easing ends. Economists are divided on future cuts amid trade war impacts and inflation nearing targets.
BENGALURU (Reuters) - The European Central Bank will almost certainly cut interest rates on June 5, with a more than 70% majority of economists polled by Reuters expecting policymakers to pause for the first time in a year in July despite a weak economy at risk from the U.S.-led trade war.
There appears to be growing agreement among Governing Council members after six consecutive 25 basis point cuts to the deposit rate - among the most aggressive moves among its peers - leaving rates close to neutral, neither restricting nor stimulating the euro zone economy.
Recent data showed inflation has stayed just above the central bank's 2% target for the past few months, but underlying price pressures have recently picked up. Also, rising near-term consumer price expectations argue against rapid rate reductions.
The ECB will cut its key deposit rate by 25 bps on June 5 to 2.00%, according to all 81 economists in a Reuters poll taken before a U.S. trade court on Wednesday invalidated swathes of President Donald Trump's tariffs on imported goods.
The court ruling came after Trump backed away from his threats to impose 50% tariffs on imports of European Union goods earlier this week and restored a July 9 deadline to strike a deal. The Trump administration has appealed the court decision.
A more than 70% majority, or 51 of 72, predicted the ECB would pause with its rate reductions in July. While a majority of economists expect at least one more cut after June, there is no consensus on the timing of the next move.
RIGHT DIRECTION
"There is a good reason to wait for September after June. If we just look at inflation developments, it broadly looks like it's heading in the right direction, but there's still some data that suggest caution," said Bas van Geffen, senior macro strategist at Rabobank.
Nearly 45% of economists, 35 of 81, said there will be one more rate cut after June, while nearly 30% said June would be the last. The rest predicted two or more additional rate reductions after June.
With such a range of views, there is no majority among economists on where the deposit rate will end the year.
"A skip in July could also serve as a signal that the Governing Council is nearing the end of the easing cycle," said Mariano Cena, senior European economist at Barclays.
Interest rate futures are pricing in just one more cut after June, in September.
In the meantime, inflation is expected to reach the ECB's target next quarter, much earlier than Q1 2026 predicted just a month ago.
Poll median forecasts also showed the euro zone economy will expand 0.9% this year, a slight upgrade from 0.8% predicted in April, picking up to 1.1% next year.
Some said infrastructure and defence spending, particularly in Germany, would help offset the negative impact of the U.S.-led trade war.
"We've been waiting for the fiscal package for a long time, particularly infrastructure. That should have positive multipliers for the European economy," said Chris Scicluna, chief Europe economist at Daiwa Capital Markets.
"We assume the rebalancing of global portfolios will continue for some time away from the U.S ... And we can see why Europe will be a beneficiary to some extent of that."
(Other stories from the Reuters global economic poll)
(Reporting by Indradip Ghosh; Polling by Aman Kumar Soni and Anant Chandak; Editing by Ross Finley and David Holmes)
The ECB is expected to cut interest rates on June 5, with a 25 basis point reduction to 2.00%.
A majority of economists, over 70%, predict that the ECB will pause its rate reductions in July.
Recent data shows that inflation has remained just above the ECB's 2% target, with underlying price pressures increasing.
Poll median forecasts indicate that the euro zone economy will expand by 0.9% this year, slightly up from the previous prediction of 0.8%.
Factors such as inflation developments and economic growth forecasts will influence future ECB rate cuts, with some economists predicting one more cut after June.
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