The European Central Bank (ECB) is widely expected to cut its key interest rate during today’s policy meeting, trimming it from the current 2.40% to 2.15%, according to market forecasts.

With inflation nearing the ECB’s target and economic growth still under pressure, this move is seen as an effort to balance stability with support for the eurozone economy.

📉 What to Expect

Markets are pricing in a 99% chance of a 25-basis-point cut, based on LSEG data. This would bring the deposit rate down to 2%, just half of its 4% peak in mid-2023.

This expected rate cut comes amid a slowing but stabilizing inflation trend. The flash CPI data for May showed eurozone inflation at 1.9%, nearly aligning with the central bank’s 2% target. However, GDP growth remains modest, with a 0.3% expansion in Q1 2025.

🌍 A Complex Economic Landscape

Uncertainty clouds the broader outlook. Global tensions — including U.S. tariffs under President Donald Trump, the EU's possible responses, and internal shifts such as Germany’s fiscal policies and Europe’s military spending plans — are all adding to the ECB’s cautious stance.

🏦 What’s Next for ECB Policy?

While today’s rate cut is likely, the ECB has signaled a "meeting-by-meeting" approach for future decisions. Analysts expect further rate cuts later in the year, possibly in September and December, though July is not entirely off the table.

Still, economists don’t anticipate strong forward guidance. Barclays notes that the ECB will likely avoid pre-committing to future actions to keep policy flexible amid ongoing global uncertainties.

📊 ECB Staff Projections to Watch

In addition to the rate decision, the ECB will release updated forecasts for inflation and economic growth. These will be closely watched for clues on whether more easing is on the horizon.

According to the OECD’s recent Economic Outlook, euro area growth is forecast at 1% for 2025, with inflation around 2.2% — figures that support a cautious easing stance.