Sources say consensus on ECB rate cut in June strengthens, but no big cut in sight

European Central Bank policymakers are growing more confident about cutting interest rates in June as inflation continues to fall, but they have little appetite for a bigger cut, six sources told Reuters.

European Central Bank (ECB) presidents gathered in Washington for the spring meetings of the International Monetary Fund and World Bank to assess weakness in the euro zone and global economy as uncertainty over tariffs imposed by U.S. President Donald Trump curbs investment.

Euro zone data also showed business growth stagnated this month and wage increases are expected to slow sharply.

Most importantly for inflation, the 20% tariffs that Trump temporarily imposed on European goods are lower than the ECB had forecast, and the risk of EU retaliation has so far been averted.

That means many ECB governors now see an eighth of a basis point rate cut as increasingly likely when the central bank updates its economic forecasts at its June 4 meeting. The European Central Bank cut its benchmark interest rate to 2.25% earlier this month.

Officially, however, the ECB is keeping an open mind because the decision is still more than a month away and economic policy has become unpredictable since Donald Trump announced it on April 2.

An ECB spokesman declined to comment.

Trump's move has shaken investors' confidence in the U.S. economy and even its status as a global safe haven, leading to lower fuel prices and a drop in the dollar against the euro.

That has led to growing deflationary pressures in the euro zone and eased concerns about high price growth among some of the more hawkish members of the ECB's Governing Council.

However, the outlook for the future remains uncertain, with a more divided world and cheaper imports from China contrasting with stronger domestic demand from Germany's fiscal spending plans.

For this reason, policymakers interviewed by Reuters saw no reason to consider a larger rate cut of 50 basis points at this point, which they also believed could cause unnecessary panic among market participants.