Euro-zone GDP expanded at a decent pace in Q1 but that was partly due to temporary tariff front-running effects. And while higher defence and infrastructure spending will support euro-zone GDP growth late this year and in 2026, the boost will be smaller than some are hoping for. So we expect the economy to grow quite slowly in the coming years. This, together with declining in core inflation, should prompt the ECB to cut its deposit rate twice more this year, to 1.75%, and it may well go further.
Elsewhere, we think that the Riksbank, SNB and Norges Bank will cut rates in the coming months. The risks are skewed towards deeper cuts in Switzerland, whereas in Norway policymakers could yet delay rate reductions.
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