ECB expected to cut rates in April and June as tariffs threaten recession

Investors and economists believe the ECB is highly likely to cut borrowing costs next week and again in June due to the risk of recession posed by Donald Trump’s tariffs, with a 90% chance of a quarter-point cut in interest rates in April. The looming trade war is expected to create significant deflationary pressures in the euro area, leading to multiple rate reductions and potentially necessitating the use of larger stimulus measures such as liquidity backstops to stimulate the economy and counter the negative demand shock. Economic forecasts suggest that the eurozone may plunge into a recession by the second quarter of 2025, with analysts warning of potential disinflationary shocks from Chinese manufacturers and predicting a prolonged period of economic downturn and policy easing in Europe.

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