Euro-zone GDP expanded at a strong pace in Q1 but that was largely due to temporary tariff front-running effects. As a result, we suspect that GDP contracted in Q2. 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 once more this year, to 1.75%.
Elsewhere, we think that the SNB will soon cut its policy rate below zero, Norges Bank's loosening cycle will be very short, and the Riksbank's rate cuts are over.