ECB Poised to Cut Interest Rates in June as Inflation Continues to Decrease, but Uncertainty Remains over Future Rate Adjustments.

As inflation continues to decrease, there is a growing consensus among economists that the European Central Bank (ECB) will cut interest rates in June. In March, a Reuters poll of 77 economists revealed that the majority believe this will be the case. While some predict a total cut of 1.00 percentage points, others believe it will be less than that.

Inflation has fallen significantly since February, dropping from 8.5% to 2.6%. Several factors have contributed to this trend, including the tightening of monetary policy and the easing of energy crises and international supply disruptions. The central bank’s price stability objective requires inflation to be at two percent in the medium term, and it seems that this goal is within reach.

The potential interest rate cuts in June are also supported by new data on wage developments at the beginning of the year. Wage increases have contributed to a 4.0% increase in prices in February, and financial markets anticipate a decrease in key interest rates by 0.25 percentage points in June.

Despite these predictions, uncertainty remains about the exact trajectory of policy rates for the remainder of the year. Some economists believe that additional cuts may be necessary to achieve price stability objectives, while others predict that rates may remain unchanged or even rise slightly. Only time will tell what course of action the central bank will take to keep inflation under control while also promoting economic growth.