European Central Bank Eighth time reduces interest rates

Analysts, who surveyed Bloomberg, expect a reduction in interest on deposits in two percent, which is a decrease of 0.25 percentage points. Later during the year, another decrease is expected, probably in September, when the customs effect will be in full force.

While the weakening of economic growth is expected in the coming months, large European military and infrastructure expenditure could raise both inflation and growth in the long run. “ECB is in a heavy position,” says Jari Stehn, the main economist for Europe in Goldman Sachs Reserach. As it adds, the Bank has difficulty focusing monetary policy, because it is difficult to predict how the situation around customs will develop. Chairman of the ECB Christine Lagard cannot signal in which direction the interest rates will move after June.

Global trade waters are very changeable – Thursday, German Chancellor Friedrich Merz meets with Trump in the White House, while NATO-member countries will discuss the increase in defense and support Ukraine. Member of the Board of Directors of the ECB Fabio Panetta said last week that deinfulation is “near the end”, which indicates possible changes in ECB politics.

Economists expect the ECB next month to be on a summer break, but warn that the central bank cannot afford a long time. Almost 30 percent of the analysts with whom Bloomberg discussed that the ECB Steering Board can skip only one meeting, while the quarter thinks that they can afford to miss two. Traders are betting that interest rates will once again be adapted between September and a summer break, which would raise the deposit interest rate to 1.75 percent, which is the lower limit of the neutral range, nor does it stimulate the economy.

What are the projections of interest rate movements

Analysts predict that the ECB will greatly hold its previous projections, although Trump from the roots changed the world economy, banker is transferred. Euro is significantly stronger than in March, and electricity is cheaper, which creates pressure to reduce other prices, and is also a relief for firms, which suffer from poor demand. In the first quarter, the European economy recorded a higher growth than expected, because the companies-exporters hurried to deliver the goods before the duties enter into force.

Trump threatens that from 9. July, when the deadline for the Negotiations of America with trade partners will, introduce customs to as many as 50 percent on European goods. The European Union (EU) prepares countermeasures, which can lead to additional increase in customs, but also to negotiations on achieving a sustainable agreement. It is almost impossible to predict the outcome of the negotiations, which will be key to the projections of movement in the eurozone. In order to prepare, ECB has elaborated several possible scenarios, which will present on Thursday.

Politics and noise

The ECB decision was announced on the day, when important meetings were scheduled in Brussels and Washington. Defense Ministers 32 NATO members gather in the capital of Belgium to prepare for the key summit later this month. Trump from Europe requires to increase military spending on five percent of GDP, which is likely to happen, and the consequences will be felt throughout the eurozone.

Merz, the new German Chancellor, announced to support such a step. He will meet in the White House in the Thursday, which is an event with a high role that has the potential to alleviate – or tighten the Trump’s attitude towards the largest European economy and the EU.

Lagarde is facing the question in which ECB format plans to cooperate with the head of the Slovak Central Bank Peter Casemir, who was convicted of corruption last Sunday, and plans to appeal. There is also the question of whether Lagard will leave the ECB, in order to come to the forehead of the World Economic Forum. Press releases of ECB that Lagarda is determined to complete the current term of office did not stop on a path of guesses that she could go too early.