The ECB lowered borrowing costs four times last year and up to four moves are anticipated in 2025, driven by arguments that the biggest inflation surge in generations is nearly defeated while the economy demands relief.

With the euro zone suffering through an industrial recession and weak consumption, the case for a cut is so clear that none of the ECB's 26 policymakers have publicly pushed back.

That could mean a unanimous vote for a 25 basis point cut to take the deposit rate to 2.75%, its lowest since early 2023, even after the U.S. Federal Reserve, the world's largest central bank, paused its own easing cycle on Wednesday.

While ECB President Christine Lagarde is unlikely to commit explicitly to more cuts, she is likely to argue that the direction of policy remains clear and that the risk of a trade war with the United States could sap weak growth even more.

"Inflation is approaching the target in a more sustainable manner, the economic outlook remains challenging, while rates clearly remain in restrictive territory," Nordea economist Jan von Gerich said. "The process of gradual normalisation thus remains incomplete."

Inflation, which rose to 2.4% in December, could still take a few months to ease back to the ECB's 2% goal but there is little to challenge the narrative that all is on track.

Wage growth is easing, the labour market is softening, oil prices have come off early-year highs and the dollar's relentless firming seems to have stopped for now.

A few voices are still likely to argue that pressure on services costs remains too high for comfort but that is more an argument for gradualism than for a pause.

COMPLICATIONS

But with a debate already starting on where the ECB's rate cuts should end, consensus may be more difficult to maintain with each future cut.

New U.S. President Donald Trump's policies could also make the environment more volatile. His threatened trade tariffs would weigh on growth but any retaliatory measures by the European Union would risk pushing up inflation.

Trump last week demanded that the Fed cut interest rates but the bank resisted on Wednesday, arguing that inflation was still elevated and it was not in a hurry to cut borrowing costs, a signal taken by markets to suggest that a longer pause may be ahead.

Any escalation of the war of words between them might rattle financial markets.

At 2.75% the ECB's deposit rate would be approaching the 1.75% to 2.50% range considered "neutral", neither fuelling nor dampening economic activity. But any Trump-induced volatility could intensify calls for the ECB to go below this rate and start stimulating growth.

"There is a strong case to take official rates to the lower end of the range of estimates for neutral by mid-2025, with risks tilted towards the potential impact of trade frictions leading to considering even slightly lower rates," economist Antonio Villarroya at Santander CIB said.

A trade war would shake already weak confidence.

Consumers are saving up cash, industry is shrinking, governments have modest buffers to spend and exports - long the driving force behind growth - are barely expanding.

"In an environment characterised by weak domestic demand, elevated uncertainty, and still-restrictive monetary policy, firms are likely to continue holding back on investment, which we expect to contract further in the first half of 2025," Barclays economist Mariano Cena said.

But inflation is still above the ECB's target and poor productivity growth along with labour shortages could keep up price pressures, likely limiting just how far the bank can go.

Foreshadowing the upcoming debate on pausing, board member Isabel Schnabel, an outspoken policy hawk, said the ECB was getting closer and closer to the point where it must debate how much more it can cut.