Overview

• The European Central Bank reduced its deposit facility rate by 25 basis points to 2.25%, marking the seventh rate cut since June 2024.
• The decision reflects a deteriorated growth outlook caused by U.S. tariffs and heightened trade-related uncertainty impacting eurozone confidence and financing conditions.
• Inflation in the eurozone has declined to 2.2% in March, nearing the ECB's 2% target, while growth remains sluggish.
• The ECB dropped language describing rates as 'meaningfully less restrictive,' signaling a shift in its policy stance and leaving room for further easing.
• Markets now anticipate additional rate cuts this year, with a 75% likelihood of a June reduction and expectations of up to three cuts by year-end.