“Some members stated they would feel more comfortable with a 50 basis point cut in interest rates,” as recorded in the minutes of the ECB’s meeting on April 17, published today.
These members of the ECB’s Governing Council believe that “downside risks to growth have increased” due to the U.S. tariff policy, even though “the trade conflict remains relatively mild.”
In their view, uncertainty was already impacting consumption and investment, thus significantly increasing the downside risks to inflation.
The members also suggested that a further decline in the cost of money could additionally offset the recent rise in market interest rates, the widening of spreads in corporate bonds, and declining stock prices.
Surprising the markets, as the ECB has done on past occasions, should not be ruled out, according to the officials.
Nevertheless, all ECB Governing Council members eventually agreed in that meeting to reduce the interest rate on bank deposits by 25 basis points, to 2.25%.
Markets are anticipating another 25 basis point rate cut at the meeting scheduled for early June.
However, some ECB Council members have publicly expressed uncertainty about making such a move, emphasizing that caution is preferable.
