Europe | The ECB near the end of the rate cutting cycle

Summary

The ECB cut rates to 2% with broad consensus and signaled the rate-cutting cycle may be nearing its end. While confident in the inflation path, high geopolitical and trade uncertainty keeps future decisions open.

Key points

• Key points:
• The ECB cut rates by 25bp to 2.0%, with broad support across the Governing Council and only one dissent.
• The ECB remains dovish on growth, with risks still tilted to the downside; shows strong confidence on inflation path.
• Lagarde signaled the cycle is likely nearing its end and the current stance puts the ECB in a good position to face uncertainties.
• The ECB has presented alternative scenarios dependent on tariffs, a clear signal that uncertainty is exceptionally high and that they are waiting for the outcome of trade negotiations to declare the end of this rate cycle.

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