Economists collectively issue a "disclaimer"! Trump makes the European Central Bank interest rate predictions unreliable.

Economists have added a major disclaimer to their view that the European Central Bank will cut interest rates three more times: Donald Trump. The US President's unpredictable behavior in trade, international security architecture, and domestic politics has led economists surveyed to question whether their forecasts can hold. Unless a major shock occurs, they still expect the Eurozone economy to recover, and with inflation nearing the European Central Bank's target, officials should be able to lower the deposit rate from the current 2.75% to 2% by June. However, after the almost certain quarter-point rate cut next week, this situation may suddenly change. Diverging views on the ECB interest rate path Bill Diviney, Senior Economist at Rabobank, said, "The outlook could change significantly in the coming months." "The US government's tariff policy appears more aggressive than we currently think," while "indications suggest that we may see increased spending in the Eurozone, especially in defense." Unlike most economists, he believes the deposit rate will trend down to 1% by early 2026. On the other hand, Sylvain Broyer of Scope Ratings believes that after the rate is lowered to 2.5% next week, policymakers will no longer reduce borrowing costs. Economic analyst Dennis Shen of Scope Ratings predicts that the European Central Bank will pause rate cuts in April, stating, "The ECB should be cautious with rate policy after the March rate cut, to avoid cutting too quickly or aggressively, as core inflation remains high, Trump's trade war and deglobalization could suddenly push up inflation rates." "The Eurozone unemployment rate is still close to historic lows, which also supports a cautious approach by the central bank." David Powell, Senior Eurozone Economist at Bloomberg, said, "The European Central Bank is almost certain to cut rates again on March 6. However, resistance to further loosening is growing. The most interesting aspect of the upcoming meeting might be any hints of the next steps. The decision in April will be a delicate balance, but we expect a pause." Trump's latest actions include threatening to impose a 25% tariff on the EU's "cars and all other products," which could further pressure the already sluggish economic growth. Analysts are pessimistic about the EU's ability to avoid taxation, with most expecting retaliatory actions from the EU to reach 50% or more of the initial strike amount. This prospect further underscores US policy as the biggest risk facing Europe, with over half of those surveyed describing it as "significant." US policy, geopolitics are the biggest risks for the Eurozone economy While most expect Eurozone economic expansion to be impacted by actions across the Atlantic, analysts predict that there will be no significant revisions to the European Central Bank's quarterly forecasts on GDP and inflation, apart from a more subdued outlook for this year. The Eurozone's two largest economies, Germany and France, experienced economic contraction in the fourth quarter of 2025 - the former due to declining exports and moderate household spending, and the latter due to a drop in investments. Eurozone prospects are essentially affirmed European Central Bank officials have repeatedly stated that economic growth risks are tilted to the downside, primarily due to geopolitical, fiscal, and trade friction. At their January meeting, they indicated that as price pressures continue to ease, rates should further decrease to neutral levels, with the European Central Bank's current neutral range set at 1.75% to 2.25%. Most survey respondents believe that borrowing costs are at neutral levels, where they neither hinder nor stimulate economic growth, at 2%. About two-thirds of analysts expect the European Central Bank to drop any talk of policy limits in its statement next week. However, over 90% of analysts do not expect officials to classify policy as neutral, as they fear this would exacerbate speculation on whether rates have bottomed out. Economists including Arne Petimezas of AFS Interest and Claus Vistesen of Pantheon Macroeconomics believe the European Central Bank will address this issue by not constraining its stance any longer. Over 90% of those surveyed also do not expect any official forward guidance. Jussi Hiljanen, Head of Macroeconomic and Fixed Income Research at the Swedish bank Nordea, said, "Balancing differing views within the Governing Council will be a challenge for President Lagarde when commenting on the prospect of further rate cuts. Therefore, she will stick to a data-dependent approach and make no advance commitments."