By Jonathan Cable
LONDON (Reuters) - The European Central Bank will trim its deposit rate again next week to 2.50%, according to all 82 economists polled by Reuters who expected two further cuts by the middle of this year.
Inflation was forecast to hover close to the central bank's 2% target, giving it scant reason to cut much further despite a sluggish economy and plenty of risks.
Nearly all respondents to an extra question in the poll said U.S. President Donald Trump's expanding trade war would be damaging to euro zone economic growth, potentially putting the ECB in something of a dilemma.
Trump floated a 25% "reciprocal" tariff on European cars and other goods on Wednesday.
Following the widely-expected March 6 reduction, the ECB will take another 50 basis points off the deposit rate next quarter and then hold steady through at least 2026, the February 19-27 poll showed.
The outlook beyond June was less clear, with 32 of 82 respondents seeing the rate below 2.00% at the end of this year. Markets have fully priced in an end-December rate of 2.00%.
"I think the discussion at the ECB could be very easy in the sense the decision now is obvious and the rest is preparation for what they have to discuss next time," said Holger Schmieding, chief economist at Berenberg, referring to the upcoming Governing Council decision.
But at subsequent meetings, he said, the decisions will be more up for debate despite fairly firm expectations for two more rate cuts.
"All options are open. Don't rule out a follow-up rate cut. Don't rule out if they're going up too," Schmieding said.
Policymakers last month made their fifth cut since June and guided for a further reduction in March as worries about tepid growth overtook concerns about persistent inflation.
Euro zone inflation rose to 2.5% in January from 2.4% in December, official data showed. A preliminary reading for February is due to be released on Monday while those for Germany and France, the bloc's two biggest economies, will be published on Friday.
Quarterly inflation forecasts for this year were revised up slightly from a January poll, but for 2025 it was seen averaging 2.1% before averaging at target in the following two years.
DEBATE OVER NEUTRAL
The neutral rate, which neither slows nor spurs growth, has climbed in the past two years and it's no longer clear the current rate is still holding back the economy, ECB board member Isabel Schnabel said on Tuesday.
ECB policymaker Pierre Wunsch said this week the bloc faces the risk of "sleepwalking" into excessive interest rate cuts.