ECONOMIC POLICY
ECB is likely to jump ahead of the Fed by cutting rates on June 6

In Europe, inflation may be less of a problem than the weak growth outlook.

By David J. Lynch
June 4, 2024 at 7:00 a.m. EDT

Wall Street has been waiting all year for lower interest rates and later this week, it will probably get them. There’s just one problem: Those lower rates will be in Europe, not the United States.

The European Central Bank on Thursday is almost certain to lower its benchmark interest rate for the first time in nearly five years. The move will come as the Federal Reserve remains on hold with plans to trim U.S. borrowing costs, amid inflation that is proving more stubborn than anticipated.

The ECB’s expected action this week is noteworthy because the Fed, the central bank for the world’s largest economy, usually leads interest rate cycles. When inflation rose as the global economy emerged from the pandemic, the Fed began raising rates in March 2022 four months before European policymakers acted.

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A decision by a major central bank to lower interest rates, making it less expensive to borrow money to buy a home or car, would signal a turning point in the fight against higher prices that has preoccupied monetary policy officials for more than two years. A rate cut also would probably boost stock prices, in part by lifting corporate earnings.

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By David J. Lynch
David J. Lynch is a staff writer on the financial desk who joined The Washington Post in November 2017 after working for the Financial Times, Bloomberg News and USA Today. Twitter https://twitter.com/davidjlynch