📝Do Not Expect Further ECB Rate Cuts After June: Nordea

We think the ECB will cut rates by a further 25bp at the next meeting in June, though given that the central bank still emphasises exceptional uncertainty, such a step is by no means sure. We think that the economic outlook, not least due to trade and tariff developments, remains sufficiently uncertain to warrant another cut. We do not see further policy moves after June, but do think risks to this forecast are tilted to the downside for this year. Looking into next year, the risk picture turns higher, as we expect growth to be boosted by higher EU defence spending and German infrastructure investments.

Financial markets greeted the message dovishly, with especially short rates falling, while also the EUR weakened some. The market is currently pricing in a trough for the deposit rate of just above 1.5%, i.e. suggesting three more 25bp cuts vs. the one we expect. Going forward, these expectations will be impacted strongly by the development of trade restrictions, the uncertainty related to them as well as how Euro-area confidence and financing conditions will evolve. - Nordea