Global Trade Tensions Prompt Rate Cut Speculations at European Central Bank

The European Central Bank (ECB) could lower interest rates to just under 2% as international trade tensions threaten inflation and growth, according to Belgium's central bank governor, Pierre Wunsch. In a Financial Times interview published on Saturday, Wunsch highlighted the economic risks stemming from the ongoing global economic climate.

Contrasting his former hawkish views, Wunsch now advocates for possible monetary easing measures, given recent financial shocks and prevailing uncertainties. While he does not support an extensive half-point rate cut, Wunsch sees the rationale for adjustments that dip below the current 2.25% deposit rate.

Following U.S. President Donald Trump's recent tariff moves, Wunsch voiced concerns about the euro zone's inflation prospects. He believes the region faces potential short-term negative shocks with prospects for positive changes in 2026 and 2027. As markets predict an ECB rate cut on June 5, there's speculation of additional easing later, signaling that rates could lower to 1.75%. Wunsch remains open to these developments and the possibility of further financial easing.

(With inputs from agencies.)