We think the euro-zone economy will not grow at all in Q2 and Q3 as the first-quarter boost from tariff front-running will not be repeated. Looking through the tariff disruption, growth will be sluggish as consumer confidence is low and investment likely to remain quite weak – although Germany’s fiscal stimulus should provide a temporary boost next year. We suspect that the ECB will leave rates unchanged in July but forecast a final cut in this easing cycle in September, taking the deposit rate to 1.75%.
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.
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