The ECB cut its three policy rates by 25bps on June 5, lowering the deposit rate to 2.00%, refinancing rate to 2.15%, and lending rate to 2.40%, citing sustained progress toward its 2% inflation target.

• ECB staff now forecast headline inflation at 2.0% in 2025 (down -0.3pp from March), 1.6% in 2026, and 2.0% in 2027; core inflation seen at 2.4% in 2025 and 1.9% in 2026–2027.
• Real GDP growth is projected at 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027, with uncertainty from trade tensions weighing on near-term investment and exports.
• Wage growth remains elevated but is moderating; profit margins are helping to offset inflationary pressure.
• Scenario analysis suggests that further trade escalation could drag both growth and inflation below baseline forecasts.
• The ECB reaffirmed a data-dependent approach and avoided forward guidance, keeping future rate moves open-ended amid persistent global uncertainty.