Overview

• On June 5, the ECB cut its main refinancing rate by 25 basis points to 2%, marking its eighth reduction since June 2024.
• In May, eurozone inflation slowed to 1.9% from 2.2% in April, easing price pressures and enabling further monetary loosening.
• The ECB’s current 2% rate falls within a neutral policy band of 1.75% to 2.25%, indicating neither stimulus nor restraint.
• Lower rates are set to reduce borrowing costs for households and businesses, with the euribor expected to dip below 2%, while deposit yields decline.
• Future rate decisions will hinge on incoming economic data and US-EU trade negotiations, with markets eyeing a potential cut to 1.75% later this year.