Helena Lyng Blak
7 weeks ago

June ECB Rate Cuts Seem More and More Likely

As European inflation slows, the likelihood of rate cuts increases.
Alexandros Michailidis / Shutterstock.com
Alexandros Michailidis / Shutterstock.com

The Governing Council of the European Central Bank (ECB) is scheduled for a monetary policy meeting in Frankfurt on Thursday, April 11.

Inflation in the Eurozone has fallen to 2.4% in March. According to ECB forecasts, it will continue to steadily decrease, reaching 2.1% by June 2025, whereas Bloomberg Economics projects a more significant drop, with Eurozone inflation declining to as low as 1.2%.

Ahead of the US?

With inflation falling faster than previously forecasted in Europe–and easing more than in the US–the expected June rate cuts seem increasingly plausible, and would make the ECB the first of the major central banks to cut rates.

In contrast, the US inflation rate of 3.2% in February remains further from the Federal Open Market Committee’s (FOMC) target rate of 2% compared to the Eurozone’s inflation rate of 2.4% in March.

The US Bureau of Labor Statistics is set to release its March 2024 CPI report on April 10, just ahead of the ECB meeting.

According to Reuters, market sentiment holds that there is at least a 90% chance the ECB will cut rates in June. In contrast, the likelihood of similar moves by the Fed and the Bank of England is only around 50%.

Tone setting decisions

As the ECB approaches its forthcoming policy meeting, the global financial community watches closely. Should these rate cuts materialize, they could mark a significant shift in international monetary policy dynamics, offering new challenges and opportunities for investors and policymakers alike.

With inflation trends and economic indicators under constant scrutiny, the decisions made in Frankfurt could well set the tone for global financial markets in the months to come.

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