Market analysis: The European Central Bank may make one last interest rate cut after a decrease in inflation.

Felix Schmidt of Berenberg said that the European Central Bank is preparing to make its final interest rate cut this week after a decrease in inflation in the euro area in May, which will lower the deposit rate to 2%. After that, the European Central Bank may keep the rates at this level. However, this will largely depend on trade negotiations between the EU and the US. Berenberg expects the most likely outcome to be a framework agreement, which will reduce uncertainty and help the euro area economy regain momentum later this year, especially considering the increase in government spending. Schmidt said that since the operation of monetary policy is cyclical, further interest rate cuts by the ECB could stimulate the real economy when additional demand support is no longer needed.