Live Markets: What if the June ECB cut is the last one?

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20/05/2025 10:00

Corrects Barclays expectations for the ECB depo rate in the last para

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WHAT IF THE JUNE ECB CUT IS THE LAST ONE?

ECB's Isabel Schnabel repeated today her case for a steady hand in monetary policy, with some analysts also flagging the possibility that the central bank will pause in June after cutting the depo rate to 2%.

"The harmonised index of consumer prices (HICP) projections may imply that June could be the last cut, with further easing only likely as a response to negative tariff outcomes," Citi analysts said in mid-May, before reiterating yesterday and in previous reports their concern for a pause at 2%.

"While the ECB may move more towards scenarios amid trade uncertainty, the central projections on 5 June will still matter for policy guidance," they argue.

"The HICP projections will face the disinflationary impact of a 4% increase in the trade-weighted euro since March and significant falls in oil/natural gas prices."

Money markets are pricing a bit more than two 25-basis point rate cuts and a 20% chance of a third easing move by year-end EURESTECBM5X6=ICAP, with a depo rate roughly stable until next summer.

However some economists see further cuts, with Barclays expecting a depo rate at 1.5% in December.

(Stefano Rebaudo)

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