The European Central Bank will almost certainly cut interest rates on June 5, with a more than 70% majority of economists polled by Reuters expecting policymakers to pause for the first time in a year in July despite a weak economy at risk from the U.S.-led trade war.

There appears to be growing agreement among Governing Council members after six consecutive 25 basis point cuts to the deposit rate – among the most aggressive moves among its peers – leaving rates close to neutral, neither restricting nor stimulating the euro zone economy.

Recent data showed inflation has stayed just above the central bank’s 2% target for the past few months, but underlying price pressures have recently picked up. Also, rising near-term consumer price expectations argue against rapid rate reductions.

The ECB will cut its key deposit rate by 25 bps on June 5 to 2.00%, according to all 81 economists in a Reuters poll taken before a U.S. trade court on Wednesday invalidated swathes of President Donald Trump’s tariffs on imported goods.

The court ruling came after Trump backed away from his threats to impose 50% tariffs on imports of European Union goods earlier this week and restored a July 9 deadline to strike a deal. The Trump administration has appealed the court decision.

A more than 70% majority, or 51 of 72, predicted the ECB would pause with its rate reductions in July. While a majority of economists expect at least one more cut after June, there is no consensus on the timing of the next move.

Source: Globalbankingandfinance