ECB faces complex meeting in June, Dutch central bank governor Knot says in FD report

AMSTERDAM: The European Central Bank’s next policy meeting will be complex, as policymakers need to balance the uncertainty around inflation risks from US tariffs, Dutch central bank governor Klaas Knot said in an interview with Dutch financial daily FD.

“In the short term, it’s 100% clear that the demand shock will dominate, so inflation will go down,” Knot said, speaking about the effects of tariffs imposed by US President Donald Trump.

“But the ECB looks at inflation risks in the middle to long term. In the longer term inflation risks are definitely two-sided. I think the June meeting will be really complex.”

ECB cuts rates, promises agility in face of trade war uncertainty

ECB policymakers are becoming increasingly confident about cutting interest rates in June as inflation continues its march lower, but there is little to no appetite for a big move, six sources told Reuters last week.

Many governors were now seeing growing chances of an eighth quarter-point cut at the June 4 meeting, when the ECB will update its own economic forecasts, they said.

The ECB trimmed its benchmark rate to 2.25% earlier this month.