ECB’s June meeting minutes revealed that “almost all members” supported the 25bps deposit rate cut to 2.00%. Policymakers viewed the move as a safeguard to ensure “temporary undershoot in headline inflation did not become prolonged”, ensuring the 2% target remains intact through 2027. The cut was also framed as positioning rates in “broadly neutral territory,” giving the ECB room to maneuver in either direction as needed.
While some officials initially favored leaving rates unchanged to allow more time to assess inflation outlook, they ultimately aligned with the majority view. One member, however, dissented. The majority concluded that delaying a cut increase the risk of “undershooting the inflation target in 2026 and 2027”.
Overall, the ECB emphasized the need for full flexibility going forward. Given elevated global uncertainty and potential for rapid changes in inflation dynamics in both directions, the account stressed a “two-sided perspective” on inflation risks and a deliberate avoidance of forward guidance.
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