Amid a slowdown in economic activity in the Eurozone, recent data released by the European Central Bank (ECB) showed that consumer inflation expectations rose to 3.1% in April, up from 2.9% in March. This indicator is one of the key metrics monitored by the ECB to assess price stability, yet this slight increase does not appear sufficient to alter the expected course of monetary policy in the near term.
Most forecasts suggest that the ECB is likely to cut interest rates by 25 basis points at its next meeting, continuing the easing cycle that began last June. Since then, interest rates have been reduced by a total of 225 basis points, bringing the deposit rate down to 2.25%. This approach comes in response to weak growth momentum, declining energy prices, and slowing wage growth — all of which are easing inflationary pressures.
Across the Atlantic, the U.S. Federal Reserve has taken a more cautious stance. Minutes from the Federal Open Market Committee (FOMC) meeting held on May 7 revealed that Fed officials see no immediate justification for adjusting interest rates, preferring to wait amid ongoing uncertainty fueled by the erratic trade policies of President Donald Trump’s administration.
This uncertainty intensified recently when Trump announced a 50% tariff on European Union imports, set to take effect on June 1. He then reversed the decision two days later, delaying implementation to July 9. This inconsistency in trade policy has made it increasingly difficult for European policymakers to formulate accurate projections for growth and inflation.
Despite the tensions, there have been signs of de-escalation in trade relations between Washington and Brussels. The EU agreed to accelerate trade negotiations with the United States in an effort to avoid a full-scale trade confrontation. Trump welcomed this move, commenting on his Truth Social platform that the EU had reached out for urgent meetings and expressing hope for a near-term agreement.
In a related development, Klaas Knot — member of the ECB Governing Council and President of the Dutch Central Bank — stated that current inflation expectations in the Eurozone appear “bleak.” He added that medium-term inflation prospects remain uncertain, warranting careful and measured action from European monetary policymakers.
On the markets front, the euro declined against the U.S. dollar, driven by the greenback’s improved performance following a ruling by a federal court in New York that deemed Trump’s “Liberation Day” tariffs unconstitutional, stating that the president had exceeded his authority.
This cautious tone has further strengthened the Fed’s stance, as indicated in its latest meeting minutes, which emphasized that continued uncertainty justifies keeping interest rates unchanged in the near future, especially as U.S. economic forecasts remain volatile and highly sensitive to external developments.
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