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.

The European Central Bank cut some of its growth and inflation projections on Thursday as the fallout from a global trade war is likely to prove a drag for the 20-nation euro zone.

Traders are increasingly confident the European Central Bank will pause its run of interest rate cuts now that the central bank sees itself as well-positioned to deal with global economic uncertainty