KPMG comments on today’s European Central Bank decision

"Today’s decision comes amidst a significant increase in economic uncertainty, which could pose a risk to the medium-term inflation outlook. Governments across Europe have signalled their intention to loosen fiscal policy, with Germany announcing a substantial spending package for both defence and infrastructure. While this is expected to boost growth prospects in the medium term, it could potentially lead to a rebound in inflationary pressures. The prospects of trade tariffs imposed on Europe and its trading partners accentuate the upside risk.

“At the same time, uncertainty about business conditions, including the nature of the upcoming tariffs and changes to regulatory frameworks, could see businesses delay investment decisions in the near term, putting downward pressure on growth in the coming months.

"Policy uncertainty is expected to remain elevated this year, creating a more challenging backdrop for ECB policymakers. This will mark a break from the more stable environment the ECB was operating in when it began its easing cycle last summer. Looking ahead, the path for interest rates is likely to be less predictable over the coming year. We currently expect a pause in the upcoming April meeting but by June, the Governing Council may have enough time to digest the data flow and reassess the risks to the inflation and growth outlook, opting for another cut.”

-ENDS-

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