Traders see a 98% chance of a quarter-point reduction by the European Central Bank. The Federal Reserve has paused.

The European Central Bank cut its economic growth expectations for the euro zone once more on Thursday and raised its projection for inflation this year, even as it predicted price growth back at target in 2026.

The European Central Bank doesn’t have a role in helping governments finance more defense spending and will stick to its mission of price stability, President Christine Lagarde said.

Christine Lagarde said the central bank is switching “to a more evolutionary approach” as it will take longer for inflation to cool towards its 2pc target.

In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.

Although the ECB would not pre-commit to future rate cuts, the fact that Christine Lagarde did not push back on lower rate cut expectations is a sign that the ECB is comfortable with a neutral rate around 2%.