The ECB cut interest rates for the eighth time in the past year and signalled at least a pause in policy easing next month since inflation was now safely back at its 2% target after three years of overshooting.

Looking further forward, the ECB is forecasting an inflation rate of just 1.6 per cent for 2026, meaning it would undershoot its medium-term inflation target of 2 per cent.

Eurozone inflation fell to 1.9% in May, below forecasts, boosting expectations of an ECB rate cut on Thursday. Core inflation also eased to 2.4%. The euro slipped and bond yields fell as markets priced in a 25bp rate cut to 2.