The European Central Bank (ECB) is expected to cut interest rates on April 17 to address the easing inflationary pressures and slowing economic growth. The move is expected to come before the full impact of the latest shock in US trade policy, when President Donald Trump announced a 90-day delay in heavy tariffs imposed on most countries except China.
The surprise move from the White House provided some relief to global financial markets, with sharp jumps on Wall Street and European markets. However, a blanket 10% tariff on almost all US imports remains in place, in addition to existing tariffs on vehicles, steel and aluminium. This situation suggests that the risk of a slowdown in growth and inflation in the euro zone has not yet subsided.
The ECB has cut its main interest rate six times since June last year, bringing the current reserve requirement rate to 2.50%. According to a Reuters poll conducted between April 7 and 9, 61 of 71 economists expect another rate cut next week. In fact, more than 70% expect another cut in June, bringing the rate to 2.00%. This is earlier than the March survey which put the cut in the third quarter.
Meanwhile, the uncertainty over US trade policy in recent months has made it difficult to make long-term forecasts. Trump has repeatedly enacted and withdrawn his tariff policies, creating uncertainty that has unsettled analysts. Many economists are now more cautious, describing the current situation as “chaos” and requiring a careful reassessment before making any new projections.
More worryingly, 91% of economists surveyed agree that US tariffs are having a bigger impact on business sentiment in the eurozone than fiscal spending plans, including infrastructure initiatives in Germany. While inflation is expected to remain above the ECB’s 2% target this year, the risk of disinflation is increasing. The economic growth forecast for 2025 has now been lowered slightly to 0.8%, compared to 0.9% in the previous survey.
