FRANKFURT, Germany–Even as the Federal Reserve holds off on any rate cuts, the European Central Bank said it may need to cut interest rates to “slightly below” 2% as global trade tensions pose downside risks to inflation and growth, Belgium’s central bank governor, Pierre Wunsch, told the Financial Times.
Wunsch, who is known for his hawkish positions, according to the Financial Times,, told the publication that recent shocks and uncertainty could justify a mildly supportive monetary policy, including a potential cut below the current 2.25% deposit rate.
Wunsch sees no case for a larger, half-point cut in the foreseeable future, the FT quoted him as saying.
He also said that developments since President Trump’s tariff announcements have created clear “downside risks to inflation” in the euro zone, along with additional threats to economic growth.
Wunsch told the FT that the euro zone might be exposed to “negative [economic] shock in the short term” that might be followed by a “positive shock in 2026 and 2027.”
‘90% Chance’
According to the Financial Times, markets now see a roughly 90% chance of an ECB rate cut on June 5, but have priced in only one additional easing over the rest of the year, suggesting that the ECB’s deposit rate could bottom out at 1.75%, Reuters reported.
Wunsch said he was “not shocked” by such forecasts and was open to contemplating further easing, the Financial Times said.
