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Investing.com -- ING expects the European Central Bank to cut interest rates again this week, citing renewed economic pressures from trade tensions and a stronger euro.
In an update posted on Monday, ING Economics said the ECB’s stance has shifted since its March meeting, when a pause seemed likely.
At that point, rates were considered close to neutral, and optimism had grown following Germany’s fiscal policy reversal and increased European defense spending.
These factors had buoyed the eurozone’s growth outlook. However, ING now argues that further easing is necessary in light of changing conditions.
New U.S. tariffs on European goods, coupled with a rising euro and falling energy prices, have raised concerns over growth and disinflation in the near term.
ING said these developments leave the ECB with little choice but to continue its easing cycle, describing the anticipated move as an “insurance cut” — one that carries little risk but helps shore up market confidence.
Delaying action could raise doubts about the ECB’s willingness to support growth and risk additional euro appreciation. ING noted that the trade-weighted value of the euro is at its highest level since the start of the monetary union.
Alongside the expected rate cut, the ECB is likely to adjust its language. Instead of stating that policy is becoming “meaningfully less restrictive,” it may emphasize that a 2.25% deposit rate falls within the estimated neutral range.
ING anticipates that prolonged trade tensions and currency strength might drive the ECB to ease beyond its current guidance, requiring the central bank to signal increased openness to further stimulus.