• Quite likely keeping 2% inflation will require some further cuts for fine tuning.
  • Market pricing of one more cut or so not out of the realm of the baseline.
  • Fine-tuning cuts will very much depend on how the economy develops.
  • May at some point, not yet by any means, go into accommodative territory.
  • Must be cautious about potential persistence of undershooting.
  • We need to take care of those risks of a too persistent or large deviation from target.
  • So far, seems deflationary effect of trade tensions could dominate, but final outcome open.
  • June cut to ensure that inflation in 2026 eventually turns the corner and starts returning towards 2%.

The ECB continues to look very confident that the risk ahead is undershooting on their 2% target and assigns very little risk to renewed inflationary pressures. Hope for them that they are right.

ECB's Kazaks
ECB's Kazaks
Source: Forex Live