Frankfurt: The European Central Bank (ECB) is most likely to cut rates in September or December, while it's expected to pause its rate cut cycle in July. Uncertainties in the eurozone because of US tariffs are expected to prompt the ECB to pause cutting rates for now and adopt a wait-and-see approach.

According to Anadolu Agency, Peter Vanden Houte, chief economist at the ING Group, stated that the ECB's monetary policy is currently positioned well and is not restrictive anymore. He highlighted that recent economic developments suggest some deflationary pressure, noting the euro's appreciation and the impact of higher-than-expected US import tariffs on European goods. These factors may necessitate additional stimulus to support the European manufacturing sector.

Houte further explained that the ECB considered medium-term inflation risks, particularly in Germany, where significant fiscal stimulus measures might lead to inflation rising again next year. He emphasized that a wait-and-see approach is the most probable course of action for the ECB, given that the next potential tariff escalation is not expected until August 1.

Hadrien Camatte of Natixis expressed confidence in the ECB's positioning to assess the current environment and risks. He mentioned that by September, the ECB would likely have enough data to proceed with a rate cut, with a potential additional cut in December if US tariffs reach 30% and European measures are not proportionate.

Bas Van Geffen of Rabobank noted that the ECB is expected to maintain its deposit rate unchanged at 2% this month, with cuts unlikely unless the economic outlook worsens significantly. He identified trade policy as a key risk but suggested ongoing negotiations or a possible EU-US deal could negate the need for rate cuts.

Marco Wagner of Commerzbank anticipated that the ECB would keep rates unchanged in July and wait until September for any adjustments. He predicted a fall in eurozone inflation below the ECB's 2% target, driven by lower energy prices and the euro's appreciation, which makes imports cheaper. Wagner added that the continuing weakness of the eurozone economy supports further monetary easing.