Economic growth has been fairly resilient to tariffs so far and, as long as tariffs stay around the 15% agreed in the EU-US trade deal, the hit to activity should be small. But growth will be sluggish this year as low confidence and slowing income growth weigh on consumption. Next year, Germany’s fiscal stimulus should provide a temporary boost to growth. Otherwise, we think the ECB’s easing cycle has now come to a close, with the deposit rate set to stay at 2.0% for the foreseeable future.
Elsewhere, we think that the SNB will cut rates back into negative territory later this year while Norges Bank will follow up its 25bp cut in June with a further 50bps of cuts. But we suspect that the Riksbank will keep its policy rate at 2% over the coming quarters.