The ECB is on the verge of completing the rate cut cycle: disagreements are growing

The ECB is nearing the end of its interest rate reduction cycle, which is causing increased disagreement among its members. The borrowing rate is close to a neutral level, and the threat of tariffs from US President Donald Trump and rising defense spending are adding to the uncertainty.

The planned reduction of the deposit rate to 2.5% on Thursday, March 6, is likely to be the last decision reached unanimously. There is already a debate within the ECB about further steps, their pace and scale. The reason for the dispute is the risk that additional rate cuts may lose their effectiveness in supporting the weak eurozone economy. Some members warn of the consequences of excessive weakening.

Additionally, the economic prospects of the region may worsen due to US trade tariffs. However, a potential peaceful settlement of the conflict in Ukraine, despite its current improbability, could be a key factor in improving the situation in the eurozone.