Finance
ECB wary of rising global trade uncertainty, June accounts show
Published by Global Banking & Finance Review®
Posted on July 3, 2025
3 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on July 3, 2025
3 min readLast updated: January 23, 2026
The ECB is cautious about global trade uncertainty affecting economic conditions, with a pause in rate cuts likely as inflation risks persist.
By Marc Jones and Yoruk Bahceli
(Reuters) -Euro zone policymakers cut rates last month to prevent an unwarranted tightening of monetary conditions in the face of the elevated uncertainty around global trade, the accounts of their June 3-5 meeting showed on Thursday.
The ECB cut interest rates for the eighth time in a year last month but signalled a pause in any further easing as inflation is already back at target and erratic U.S. trade policy creates too much uncertainty.
"Members underlined that the outlook for the global economy remained highly uncertain," the ECB accounts said, and that "elevated trade uncertainty was likely to prevail for some time and could broaden and intensify."
A pause in the ECB's rate cutting cycle has become an even greater certainty in the weeks as the majority of policymakers have lined up behind the premise that key data and clarity on U.S. trade talks will not be available by their July 24 meeting.
Markets are also on the same page. Investors see only one more cut in the ECB's 2% deposit rate, sometime towards the end of the year, before rates start going back up in late 2026.
"Indicators for April and May already suggested some slowdown" in the global economy, the ECB's accounts on Thursday added.
Although most policymakers argue that the ECB has essentially delivered on its inflation target, some, including Finland's Olli Rehn, Portugal's Mario Centeno and Belgium's Pierre Wunsch, have warned about the risk of inflation going too low, thereby requiring more support.
Indeed, price growth is projected to dip below the ECB's target later this year and stay under 2% for 18 months on a strong euro, low energy costs and cheap Chinese imports, before coming back to target.
Last month's rate cut should "ensure that the temporary undershoot in headline inflation did not become prolonged," the accounts said.
The strength of the euro - up nearly 14% this year against the dollar - was also noted a number of times in the accounts.
Historically, the euro falls against the greenback when market volatility increases.
Over the past three months, however, the euro has gone up hand in hand with volatility, the ECB said, "suggesting that the euro – rather than the dollar – had recently served as a safe-haven currency".
But the euro's rise will also weigh on exports, the ECB said. Policymakers have ramped up warnings this week about the hit the bloc's economy will face from further euro appreciation.
The bank also described the resilience of the euro area government bond markets in the face of April's turbulence driven by U.S. President Donald Trump's trade war as "remarkable."
Others, however, have warned that deglobalisation, a green transition and the ageing of the world's population will raise price pressures further out, and the ECB could soon face above target inflation once again.
(Additional writing by Balasz Koranyi; editing by Mark Heinrich)
The ECB cut interest rates to prevent an unwarranted tightening of monetary conditions due to elevated uncertainty around global trade.
The ECB accounts indicate that the outlook for the global economy remains highly uncertain, with elevated trade uncertainty likely to persist.
The strength of the euro, which has risen nearly 14% against the dollar this year, is expected to weigh on exports and has raised concerns among policymakers.
Investors anticipate only one more cut in the ECB's deposit rate, likely towards the end of the year, before rates begin to rise again in late 2026.
Price growth is projected to dip below the ECB's target due to a strong euro, low energy costs, and cheap Chinese imports, with expectations of remaining under 2% for 18 months.
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