Bryan Conway, Director at international corporate finance firm Centrus, has shared his insights on the recent ECB interest rate cuts.
The European Central Bank delivered its widely expected 25 basis point rate cuts, lowering the deposit facility rate from 3.75% in September 2024 to 2.25%.
Although Europe has secured a 90-day reprieve from Trump’s global tariff policies, uncertainty remains high and is expected to weigh on growth. The fallout from escalating global trade tensions—particularly the intensifying US-China trade war—poses additional risks. There is growing concern that diverted goods from China could flood European markets, further dampening the region’s economic outlook. Compounding these challenges is the euro’s sharp appreciation against the US dollar since the Liberation Day announcement, which has drawn increasing concern from ECB officials.
While the rate cut was fully priced in by markets, expectations remain for further easing this summer. An additional 25 basis point cut is currently priced in by July, with a 68% probability of that move occurring as early as June. Market participants now see the terminal rate closer to 1.5%, a notable downward revision from the 2% forecast at the start of the year.
