The European Central Bank (ECB) looks set to cut interest rates yet again on Thursday as it faces a period of extreme economic uncertainty. Since the last monetary policy meeting, United States President Donald Trump imposed significant tariffs, then paused some. While the US and the European Union are involved in trade deal talks, they seem to be moving slowly, providing no clarity to central bankers.
The ECB's main concern remains weak Eurozone growth. While the impact of tariffs on inflation is more difficult to assess, growth is widely expected to suffer even if it does not push the euro area into recession. Cutting rates could go some way toward lifting domestic demand and investor sentiment. Meanwhile, the disinflationary process continues, with annual inflation for March confirmed at 2.2%. ECB Vice-President Luis de Guindos suggested tariffs could push prices down if growth keeps lagging and export demand drops. On balance, the ECB is likely to deliver another 25-point cut and decline to offer even a hint of guidance as long as uncertainty persists.
