European Central Bank set to cut interest rates again amid easing inflation and tariff uncertainty

• The European Central Bank is expected to lower key rates by 25 bps on Thursday.

• The focus will be on the ECB's statement language and President Christine Lagarde’s comments.

• The EUR/USD pair braces for intense volatility on the ECB policy announcements.

The European Central Bank (ECB) will announce its April interest rate decision on Thursday at 12:15 GMT. Markets widely expect the central bank to lower key rates for the sixth consecutive time.

ECB President Christine Lagarde will hold a press conference at 12:45 GMT. At this conference, she will deliver the prepared statement on monetary policy and respond to questions from the media.

The Euro (EUR) remains poised for a big reaction to the ECB announcements against the US Dollar (USD).

What to expect from the European Central Bank interest rate decision?

The ECB is set to deliver another 25 basis points (bps) cut after the April policy meeting, reducing the benchmark rate on the deposit facility to 2.25% from 2.5%, with the disinflation process remaining on track.

Data released by Eurostat showed that the Harmonized Index of Consumer Prices (HICP) in the Eurozone rose 2.2% year-over-year (YoY) in March, after recording a 2.3% increase in February. Additionally, the annual core HICP inflation softened to 2.4% from 2.6% in the same period.

Investors will scrutinize the policy statement to see how the ECB expects the United States’ new trade regime to impact the inflation outlook and growth prospects in the European Union (EU).

Previewing the ECB’s April meeting, TD Securities analysts said they forecast a 25 bps reduction in rates. “Key focus in the press conference should be on economic uncertainty pertaining to trade policies and global demand going forward. As such, wording on future rate path is likely to be vague and stress data dependency,” analysts noted.

Earlier in the month, ECB Governing Council member Gediminas Šimkus argued that the US tariff decisions warrant a more accommodative monetary policy and added that a 25 bps cut will be needed in April. Although the US and the EU agreed to a 90-day pause in reciprocal tariffs since then, there are still a lot of uncertainties regarding what the EU-US trade relations will look like after the grace period. Citing people familiar with discussions, Bloomberg reported earlier this week that the EU was expecting a bulk of the US import tariffs to remain in place after little progress was made in negotiations that took place on Monday.