ECB to cut rates at 6th June meeting, then pause

Having agreed to do so at their last meeting, we think the ECB Governing Council will go ahead and cut the deposit rate by 25bp next week, to 3.75%. As the recent inflation data have been a bit higher than the Bank had expected, back-to-back rate cuts now seem unlikely. But on balance, we still think the disinflation process is broadly on track so we forecast a total of four 25bp rate cuts this year, which would bring the deposit rate down to 3.0% by December.