Despite President Trump’s latest decision to pause the additional tariffs for 90 days, his farcical on-and-off tariff announcements will still have a big impact on the world economy. We are not forecasting a global recession, but the shock to confidence, trade and investment has increased downside risks to activity and inflation in Europe. As a result the ECB seems certain to cuts interest rates by 25bp, taking the deposit rate down from 2.5% to 2.25% next week, and we think it will go further and reduce its deposit rate to 1.75% in the coming months.
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