- The ECB should pause further interest rate cuts until at least September.
- We should keep out powder dry given the US-EU trade war.
- No reason to lower rates in June and July.
- Cutting further would be more risky than staying where we are now.
- Further rate cut would likely have no effect on economic activity.
- Economic activity held back by uncertainty rather than restrictive monetary policy.
- Borrowing costs have come down so much over the past year that they are no longer slowing down economic activity and are potentially even stimulating growth.
- A ‘number of people’ in the ECB Governing Council are also ‘skeptical’ about additional rate cuts.
Of course it’s no surprise that Holzmann delivers hawkish comments, but he has a point though. Economic activity kind of paused as the US trade war started and once things normalise (which is already happening), then you could get a strong bounce back in activity considering the insurance cuts delivered by the ECB. That’s a risk to keep in mind for the second half of 2025.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
