Market News

By Balazs Koranyi and Francesco Canepa

Summary

• Deposit rate cut to 2.0% from 2.25>#/li###
• Lagarde says bank now 'in a good position'
• Sticks to 'meeting by meeting' guidance
• Markets see July pause in rate cuts

FRANKFURT, June 5 (Reuters) - The European Central Bank cut interest rates as expected on Thursday but hinted at a pause in its year-long easing cycle after inflation finally returned to its 2% target.
The ECB has lowered borrowing costs eight times, or by 2 percentage points since last June, seeking to prop up a euro zone economy that was struggling even before erratic U.S. economic and trade policies dealt it further blows.

With inflation now just below 2%, ECB President Christine Lagarde said the central bank for the 20 countries that share the euro was in a "good position" with the current rate path, a signal investors took to mean a break in cuts, if not an end to policy easing.

Sources close to the discussion also said the time has come for at least a break since the ECB has already done the legwork in taming inflation and additional support was not needed for now, especially since little new data would be available by the July meeting.

Speaking to Reuters on condition of anonymity, four sources with direct knowledge of the discussion said there was broad agreement around the table about sitting tight in July, and a few even made the case for a longer pause, barring unexpected market turbulence.
Lagarde was less explicit but also hinted at steady policy at the next meeting.