ECB: End of the Cuts Cycle and Economic Outlook

The ECB's monetary policy has been a focal point for the Eurozone economy since June 6, 2025. The cut to 2% represents the eighth consecutive reduction since June 2024, reaching its lowest level since 2022. ECB President Christine Lagarde stated that the bank is "at the end of the current cycle" of cuts.

Inflation forecasts have been revised downwards: 2.0% for 2025 (from 2.3%), 1.6% for 2026 (from 1.9%), and 2.0% for 2027. Annual inflation stood at 1.9% in May. Regarding GDP , the Eurozone grew by 0.6% in the first quarter of 2025. The forecast for 2025 remains at 0.9%, with a slight decrease for 2026 (from 1.2% to 1.1%) and unchanged for 2027 (1.3%). Following Lagarde's comments, the euro strengthened against the dollar, reaching its highest levels since April.

At the national level, the Bundesbank forecasts that the German economy will stagnate in 2025, marking the third consecutive year of no growth, attributed to uncertainty in international trade policy . Germany projects inflation of 2.2% in 2025.

Despite the challenging macroeconomic context, major corporations such as Airbus and LVMH present positive projections, with estimates of growth in profits and revenue. In the case of Airbus, the upturn in employment and wages reflects the role of the CCOO union in its internal elections.

The ECB's decision to conclude its cuts cycle, shifting from an "urgency" to a "patience" stance, indicates that immediate inflationary pressures are under control. However, downward revisions to forecasts suggest that disinflationary forces are deeper than expected, possibly fueled by structural weakness and trade tensions.

The economic stagnation in the Eurozone and the prolonged slowdown in Germany reflect persistent structural challenges . These differences could lead to greater economic divergence between Member States, making a common monetary policy difficult. In this context, the ECB could find its stimulus capacity limited, shifting some of the responsibility to national fiscal policies and structural reforms .

The resilience of companies like Airbus and LVMH in the face of the macroeconomic environment demonstrates the strength of strategic industrial sectors. This disconnect between business success and overall economic weakness could deepen economic inequality if it doesn't translate into shared benefits, such as employment or wage increases.

Given this, policymakers face pressure to ensure that corporate success benefits society more broadly. Christine Lagarde has emphasized the need to assess the data at every meeting, especially given the trade uncertainty with the United States, which could alter monetary policy.

"Most indicators of underlying inflation suggest that inflation will stabilize steadily around the Governing Council's 2% objective over the medium term." — European Central Bank

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