Room to cut

In Europe, the latest inflation data came in below expectations, driven by a notable drop in services prices. This has cleared the way for the ECB to cut rates this Thursday, a move markets have already started to price in, as shown by the continued decline in the implied ECB rate for June 2025. Whether further cuts will follow remains uncertain. The ECB is unlikely to commit, but the bias toward easing is becoming increasingly clear. While risks persist — from trade tensions to growing political uncertainty — the inflation picture in Europe is no longer as pressing as in the U.S. Lower rates provide support for equity valuations, and with European markets still trading at a significant discount to the U.S., this shift could prove meaningful for investors into European equities.