From Morningstar: 2024-06-03 11:10:00

The European Central Bank is expected to announce its first interest rate cut in eight years on Thursday, with the eurozone’s key interest rate forecasted to fall by 0.25 percentage points to 4.25%. Markets anticipate less than 0.60 percentage points in cuts in 2024, down from previous expectations of three to five cuts.

Despite an increase in eurozone inflation to 2.6% year on year in May, the ECB is still on track to make the interest rate cut. Core inflation also rose to 2.9%, showing an acceleration in prices. The upcoming rate announcement on June 6 will be crucial for future monetary policy decisions.

Concerns are rising about the possibility of the ECB making additional rate cuts beyond June, with speculation on a potential cut in July. However, the exact path of rate cuts remains uncertain, with the ECB signaling its intention to reduce rates gradually based on economic data. The decision in July will depend on inflation numbers in May and June.

The discussion around further rate cuts post-June is sparking concerns about the impact of restrictive monetary policy. While some governing council members support additional cuts, others caution against rapid decisions. Economists predict a slow pace of rate cuts for the remainder of the year, citing downward inflation trends and sluggish economic growth.



Read more at Morningstar: ECB Set to Cut Rates Despite Inflation Uptick