06:09 AM EDT, 06/06/2025 (MT Newswires) -- The European Central Bank cut the deposit facility rate by 25bps to 2.00% on Thursday as expected, said Deutsche Bank.

The bank thought ECB President Christine Lagarde might send a soft signal of willingness to pause in July. The message that President Lagarde sent -- that the ECB is "in a good position to navigate the uncertainties ahead" -- feels more significant.

It feels like the ECB is saying that it has reached the appropriate level of rates and can afford to remain at this level of rates for longer, stated Deutsche Bank.

The ECB acknowledges the arguments for macro resilience: rising real incomes, a robust labor market, easy financial conditions and the anticipation of defense and infrastructure spending. Yet uncertainty remains "high," pointed out the bank.

The risks to growth are still described by the ECB as being skewed to the downside. The outlook for inflation is "more uncertain than usual".

Deutsche Bank is holding the view of the ECB cutting rates to 1.5% for the moment. The bank acknowledged in its preview that the risk of the ECB stopping the easing cycle before it reaches 1.5% had increased.

However, it is still too early to judge the impact of the trade war with the United States, and the path of the trade war is in any case still inherently unpredictable.

The bank is expecting growth to be "soft" in H2 and thinks that underlying domestic disinflation is entrenched. Even modest downside surprises could encourage the ECB Governing Council to cut again, it added.