The members of European Central Bank reduced the interest rates Last month to avoid unjustified tightening of monetary conditions and in the face of high uncertainty in relation to trade, according to the minutes of its meeting from June 3 to 5 released on Thursday (3).
The ECB has cut interest rates for the eighth time last month, but signaled a break in any additional loosening as inflation is already back to the goal and the Erratic Commercial Policy of the United States creates a lot of uncertainty.
“The members emphasized that the prospects for the global economy remain highly uncertain,” said the ECB. “High commercial uncertainty will probably prevail for some time and can expand and intensify.”
A break in July became an even greater certainty in the weeks that followed the June meeting, as most members aligned in favor of a break based on the premise that data and the clarity of commercial negotiations will not be available until their next meeting.
Markets are also on the same page. Investors only see another cut in the 2% ECB deposit rate by the end of the year, before starting a monetary tightening at the end of 2026.
“April and May indicators already suggest some slowdown in the global economy, the ECB said.
Although most authorities argue that the ECB has essentially met its goal, some, including Finn Olli Rehn, Portuguese Mario Centeno and Belgian Pierre Wunsch, warned of the risk of inflation being too low, demanding even more support.
In fact, the projection is that the increase in prices fall below the ECB goal this year and remains below 2% for 18 months due to a strong euro, low energy costs and cheap Chinese imports before returning to the goal.
Others, however, warn that the unflooring, the green transition and the aging of the population will further increase pressure on prices and the ECB may soon face inflation above the goal again.
