ECB eyes another rate cut amid tariff uncertainty

June 02, 2025 (MLN): The European Central Bank is expected to deliver its seventh-straight interest rate cut this week as U.S. President Donald Trump's volatile trade policies add to headwinds for the sluggish eurozone.

Even before Trump unleashed his on-off tariff onslaught on the world, the ECB had been bringing borrowing costs down as inflation eased.

Worries about sluggish performance in the 20 countries that use the euro have increasingly overshadowed inflation concerns as higher rates have pinched businesses and households, as APP reported.

Trump's tariffs have added to the sense of urgency. Europe is in the president's crosshairs over its hefty surplus in traded goods with the United States, stoking fears about a heavy hit to the continent's exporters.

Predicting a cut when the ECB's governing council meets Thursday, HSBC said the eurozone's "near-term outlook has deteriorated on the recent US tariffs announcements and related uncertainty."

Analysts expect another quarter-point reduction that would take the Frankfurt-based institution's key deposit rate to two percent.

But observers believe the June cut could be the final one in the current streak, with the ECB likely to pause at its next meeting in July to take stock of the latest economic developments.

The ECB's series of cuts stands in contrast to the U.S. Federal Reserve, which has kept rates on hold recently amid fears that Trump's levies could stoke inflation.

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