ECB cuts rates and hints at pause

As had been widely expected, the ECB Governing Council decided today to cut the deposit rate (and the other two key interest rates) by a further 25 basis points (bp) to 2.5%. The decisive factors were the inflation outlook, the dynamics of underlying inflation and the transmission of monetary policy. According to the Governing Council of the ECB, the restrictive effect of monetary policy on the economy has eased significantly. We see these statements as an indication that interest rates may not be lowered further for the time being at the upcoming meeting of the ECB Governing Council in April. We expect the next ECB rate cut in June. However, the environment is very uncertain.