The European Central Bank (ECB) kept interest rates unchanged on Thursday, maintaining its key deposit facility at 2% for the second consecutive meeting. The decision, widely expected by markets, comes amid heightened global uncertainty tied to U.S. President Donald Trump’s aggressive tariff measures. The ECB last cut rates in June, easing from a peak of 4% in 2023.

Inflation in the euro zone remains close to the bank’s 2% target, and the Governing Council said its outlook is “broadly unchanged.” Policymakers emphasized a data-dependent approach and avoided committing to a future path for rates. Growth, however, remains fragile: euro zone GDP expanded just 0.1% in the second quarter, down from 0.6% previously.

The July U.S.-EU trade agreement imposed 15% tariffs on European exports, covering key industries like pharmaceuticals, though unresolved areas, such as wine and spirits, fuel ongoing uncertainty. Tensions escalated further after Trump threatened retaliation over a $3.45 billion EU fine against Google.

ECB President Christine Lagarde acknowledged that trade risks have eased somewhat but warned conditions are still volatile and far from pre-COVID “normal.” While some economists see scope for another rate cut if tariffs weigh on exports and investment, others argue the easing cycle is over, citing resilient domestic demand and tight labor markets.

Updated ECB forecasts project headline inflation at 2.1% in 2025, 1.7% in 2026, and 1.9% in 2027. For now, the central bank appears content to hold steady while monitoring trade and political risks.

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Source: https://www.cnbc.com/2025/09/11/european-central-bank-interest-rate-decision-september-2025.html