European Central Bank: The April rate cut is actually "June's advance action," inflation is close to the target but tariff concerns remain

Some European Central Bank officials believe that the reduction in borrowing costs in April this year effectively "brought forward" the interest rate cut originally scheduled for June.

According to the minutes of the European Central Bank meeting, these officials believe that "recent events have convinced them that cutting interest rates at the current meeting provides some assurance against negative outcomes and avoids adding further uncertainty during periods of financial market volatility."

The minutes were released this Thursday. Officials believe that inflation in the eurozone is "approaching its end," but trade tensions may suppress prices in the short term.

The market currently expects a roughly 90% chance of the European Central Bank cutting interest rates next month and anticipates another rate cut this year, at which point the ECB's deposit rate will bottom out at 1.75%.

ECB's April Rate Cut Seen as "Preceding" June Action

Last month, the European Central Bank conducted its seventh rate cut of the year and warned that U.S. tariffs would have a significant impact on economic growth, further reinforcing market expectations for more easing policies in the coming months.

The minutes mentioned:

"The rate cut at this meeting can be seen as bringing forward the potential rate cut at the June meeting, highlighting the importance of retaining ample options for future meetings."

Currently, it appears that due to the pressure of U.S. tariffs on economic growth and the strengthening euro, the European Central Bank is expected to cut rates again within the next two weeks. The strengthening euro and the potential shift of overseas goods to the European market also mean that inflation may fall to the 2% target sooner than expected.

The market expects a roughly 90% chance of the European Central Bank cutting interest rates next month and anticipates another rate cut this year, at which point the ECB's deposit rate will bottom out at 1.75%. This level aligns with the lower bound of the neutral interest rate range estimated by the ECB, which neither stimulates nor suppresses economic growth.

Belgian central bank governor Pierre Wunsch stated this week that this expectation is "reasonable," as monetary policy may need to become "moderately supportive" to avoid inflation slowing below the target.

Eurozone Inflation "Approaching Its End," Trade Tensions May Suppress Prices in the Short Term

ECB policymakers also believe that inflation in the eurozone is "approaching its end," although trade conflicts may lead to inflation in the long term, trade tensions may exert pressure on prices in the short term.

The ECB stated in the minutes:

"(Committee) members expressed greater confidence that inflation will return to target in the medium term and believe that the struggle against inflation shocks is nearing its end."

The minutes noted, "Therefore, deflationary forces may dominate in the short term."

However, some policymakers believe that tariffs will be a source of inflation in the long run. The minutes added:

"These members believe that, considering the destructive impact of disruptions to global value chains, the likelihood of trade shocks triggering inflation is higher beyond the short term."