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4w ago

ECB Poised to Hold Deposit Rate at 2% for Second Meeting

Markets look for signals on whether the easing cycle is over as the ECB updates its forecasts.

European Central Bank President Christine Lagarde addresses the media after the ECB's Governing Council meeting, at the ECB headquarters in Frankfurt, Germany, June 5, 2025. REUTERS/Heiko Becker/File Photo
Uncertainty has eased for the ECB since an EU-US tariff deal
Analysts expect the ECB to keep interest rates on hold for some months
European Central Bank chief Christine Lagarde has voiced concern about France's political crisis

Overview

  • Stable inflation near the 2% target and clearer U.S.-EU tariff terms give policymakers room to stay on hold, with a stronger euro adding downside pressure on prices.
  • France’s political turmoil looms after Prime Minister François Bayrou’s confidence vote, pushing French borrowing costs to their highest since 2011 as officials downplay near-term use of the TPI backstop.
  • The ECB will publish fresh growth and inflation projections on Thursday, with analysts expecting little change from June and some seeing slight tweaks for 2025.
  • Investors remain split on the path ahead: economists largely think the cutting cycle is finished, while market pricing implies roughly a 70% chance of one more cut by next summer.
  • Christine Lagarde is expected to offer limited guidance, having warned that political shocks weigh on markets and that threats to Federal Reserve independence could pose broader risks.