Europe likely to cut rates as bets rise for summer pause

The European Central Bank was expected to cut interest rates again yesterday and keep all options on the table for subsequent meetings, even as the case grows for a summer pause in its year-long easing cycle.

- BALAZS KORANYI FRANCESCO CANEPA

The ECB has cut rates seven times in 13 months as inflation eased from post-pandemic highs, seeking to prop up a euro zone economy that was struggling even before erratic US economic and trade policies dealt it further blows.

With inflation now safely in line with its 2% target and a cut flagged by a host of policymakers, yesterday's decision was to be uncontroversial, shifting the focus to what signals ECB President Christine Lagarde might send about policy ahead.

Investors are already pricing in a pause in July, and some conservative policymakers have also advocated a break to give the ECB a chance to reassess how exceptional uncertainty and policy upheaval both at home and abroad will shift the outlook.

"Reasons for the ECB to be cautious moving forward relate both to the need for more information on the trade war, and retaliatory measures in particular, and on German fiscal easing," Societe Generale economist Anatoli Annenkov said.