Published on 05/06/2025 – 6:52 GMT+2•Updated
6:54

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Markets are widely expecting the European Central Bank (ECB) to cut interest rates again at its monetary policy meeting later today.

“At its most recent meeting in April, the ECB reduced its key interest rates by 25 basis points, bringing the deposit facility rate to 2.25%. Markets are now pricing in another cut in June, though expectations for further easing beyond that remain uncertain. A potential pause in July is gaining traction, as the ECB evaluates incoming economic data and inflation dynamics,” market analysts at Capital.com said.

Markets anticipating ECB rate cut

The latest decision will come as inflation in the euro area cooled more than expected in May, bolstering expectations that the ECB will announce another interest rate cut.

Annual consumer price growth slowed to 1.9% in May, down from 2.2% in April, according to a flash estimate from Eurostat this week. The figure came in below economists’ forecast of 2%, and marks the first time inflation has dipped below the ECB’s 2% target since September 2024.

The decline in headline inflation suggests that business uncertainty, partly driven by renewed global trade tensions and soft consumer demand, is weighing on pricing power across sectors.

Core inflation, which strips out volatile food and energy prices, also showed signs of easing. It slowed to 2.4% in May, from 2.7% in April, falling below expectations of 2.5%. On a monthly basis, core prices rose by just 0.1%.

Asian shares mixed as US futures edge lower

Meanwhile, Asian shares were mixed on Thursday, as Wall Street’s big recent rally lost some momentum following a pair of potentially discouraging reports on the American economy.

US futures edged lower and oil prices declined.

Japan’s benchmark Nikkei 225 shed 0.2% to 37,658.46, while Australia’s S&P/ASX 200 declined nearly 0.1% to 8,535.10.

In South Korea, the Kospi jumped 2.1% to 2,829.48 after the country’s new president and leading liberal politician Lee Jae-myung began his term, vowing to restart talks with North Korea and beef up a trilateral partnership with the US and Japan.

Hong Kong’s Hang Seng gained 0.9% to 23,856.54, while the Shanghai Composite was little changed, inching down less than 0.1% to 3,374.30.

On Wednesday, the S&P 500 finished the day virtually unchanged at 5,970.81 and remained 2.8% below its all-time high. The Dow Jones Industrial Average fell 0.2% to 42,427.74, and the tech-heavy Nasdaq composite added 0.3% to 19,460.49.

The action was stronger in the bond market, where Treasury yields tumbled following weaker-than-expected economic updates.

In other dealings early Thursday morning, benchmark US crude fell 8 cents to $62.77 a barrel. Brent crude, the international standard, edged up 1 cent to $64.87 a barrel.

The US dollar rose to 142.87 Japanese yen from 142.78 yen. The euro cost $1.1413, little changed from $1.1418.