The current debate on interest rate cuts in the Eurozone is significantly shaped by the stance of ECB Governing Council member Robert Holzmann. The Austrian central bank chief advocates a wait-and-see approach until more clarity emerges regarding the impact of US tariffs and European countermeasures.
Holzmann’s Argumentation
Robert Holzmann emphasizes the dependence on trade data: Before any monetary policy easing takes place, the economic consequences of the US-Europe trade conflict should be awaited. Holzmann currently sees no urgency for interest rate cuts and points to unresolved uncertainties, including potential second rounds of wage negotiations and their inflation-related effects. While Holzmann expresses a clear preference for a pause in interest rates, he shows flexibility should the economic data change, which would justify a cut.
Context: Internal ECB Tensions
Within the ECB Directorate, tensions exist: Proponents of quick cuts, such as François Villeroy de Galhau from France, argue with a solid disinflation path and dampening exchange rate effects due to the strong euro. Since June 2024, the ECB has reduced the deposit rate in six steps by a total of 1.5 percentage points to 2.5%, with the last cut in March 2025.
Current Market Expectations
Despite Holzmann’s resistance, analysts anticipate further steps: A 25 basis point cut on April 17 is considered the baseline forecast, with initial speculation even suggesting a 50-point cut (‘XL-Cut’) amidst heightened trade risks. Société Générale forecasts additional cuts in June/July 2025, potentially down to a 1.5% base rate by the end of summer if the trade war escalates. The decision-making process will be significantly influenced by the updated economic projections available on the meeting day, especially regarding whether US tariffs will burden Eurozone growth more than previously assumed.