The ECB consensus will be built to cut interest rates in June, but there is no desire for a big move, according to sources

By Francesco Canepa

WASHINGTON (Reuters) – Policymakers at the European Central Bank are increasingly confident about lower interest rates in June as inflation continues to remain low in March, but have little appetite for the big move.

The ECB governor, who will gather in Washington for the Spring Conference of the International Monetary Fund and the World Bank, has hampered the weakening of the eurozone and the world’s economy as uncertainty from tariffs imposed by US President Donald Trump suppresses investment.

Data from the Eurozone also shows pay hikes that are expected to stall business growth this month and will be considerably easier.

Most importantly, for inflation, the 20% tariff rate that Trump tentatively imposed on European goods was not more severe than modeled by the ECB, and the risk of retaliation by the European Union has been avoided so far.

This meant that many governors had an increased chance of eighth quarter reductions at their June 4 meeting, when the ECB updated its own economic forecast. The ECB trimmed its benchmark rate to 2.25% earlier this month.

Along the ECB’s official lines, they kept an open mind, but the decision was still over a month away, considering that economic policy had become unpredictable since Donald Trump’s April 2nd release.

An ECB spokesman declined to comment.

Trump’s move has shaken investors’ confidence in the US economy, causing fuel prices and the dollar to fall against the euro, even its position as a safe haven for the world.

This has increased disinflation in the eurozone and eased concerns about the entrenchment of high-priced growth even among a number of more Takiist members of the ECB’s governing council.

But further outlook remains foggy, with a more fragmented world, cheaper imports from China and strengthening domestic demand from Germany’s fiscal spending plans creating contrasting forces.

For this reason, policymakers who spoke with Reuters had no idea why they would now consider cutting at 50 larger stations.

(Reporting by Francesco Canepa, Editing by Aidan Lewis)