The European Central Bank decided, at its meeting moments ago today, Thursday, June 5, to cut interest rates by 25 basis points, as expected, to 2.15%, marking the seventh consecutive cut. The bank also announced updated forecasts for growth and inflation.
The bank’s interest rate statement stated that inflation is approaching the bank’s target of 2% over the medium term. The bank expects headline inflation to average 2% this year, 1.6% next year, and 2% in 2027. This forecast is a 0.3% decrease for both this year and next compared to its March forecast. These estimates are primarily due to lower assumptions related to energy prices and the strength of the euro. The bank expects core inflation, excluding food and energy prices, to average 2.4% this year and 1.9% over the next two years, the same as its March forecast. The bank expects average GDP growth of 0.9% this year, 1.1% next year, and 1.3% in 2027. The unrevised growth forecast for 2025 reflects a stronger-than-expected performance in the first quarter, coupled with a weaker outlook for the rest of the year.
The European Central Bank (ECB) affirmed its commitment to ensuring sustained inflation stability at its 2% target, particularly in the current context of heightened uncertainty. The bank will adopt a data-driven approach and meeting-by-meeting to determine the stance of monetary policy. It also announced its readiness to adjust all tools to ensure inflation stability.
Markets are awaiting the ECB President’s comments and responses to journalists’ questions at the press conference, which will be held approximately 45 minutes from now.