Published by Global Banking & Finance Review®
Posted on May 18, 2025
2 min readLast updated: January 23, 2026
Add as preferred source on GoogleECB's Pierre Wunsch suggests rate cuts below 2% due to trade tensions impacting euro zone inflation and growth, with no large cuts expected soon.
(Reuters) -The European Central Bank may need to cut interest rates to "slightly below" 2% as global trade tensions pose downside risks to inflation and growth, Belgium's central bank governor, Pierre Wunsch, told the Financial Times in an interview published on Saturday.
Wunsch, previously known for his hawkish stance, told the FT that recent shocks and uncertainty could justify a mildly supportive monetary policy, including a potential cut below the current 2.25% deposit rate.
Wunsch sees no case for a larger, half-point cut in the foreseeable future, the FT quoted him as saying.
He also said that developments since U.S. President Donald Trump's tariff announcements on April 2 had created clear "downside risks to inflation" in the euro zone, along with additional threats to economic growth.
Wunsch told the FT that the euro zone might be exposed to "negative [economic] shock in the short term" that might be followed by a "positive shock in 2026 and 2027."
In an interview with the FT in February, Wunsch had warned against "sleepwalking" into excessive interest rate cuts, urging caution as the ECB considered further reductions.
Markets now see a roughly 90% chance of an ECB rate cut on June 5, but have priced in only one additional easing over the rest of the year, suggesting that the ECB's deposit rate could bottom out at 1.75%.
Wunsch said he was "not shocked" by such forecasts and was open to contemplating further easing, according to the report.
(Reporting by Rajveer Singh Pardesi in Bengaluru; Editing by William Mallard and Jamie Freed)
The article discusses the potential for the ECB to cut interest rates below 2% due to global trade tensions affecting euro zone inflation and growth.
The ECB may cut rates to counteract downside risks to inflation and economic growth caused by global trade tensions.
Pierre Wunsch is Belgium's central bank governor and a member of the European Central Bank's governing council.
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