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With inflation now back at the ECB's 2% goal and expected to stay there, policymakers chose to stay put on Thursday, just as trade talks between the EU and Trump's administration appeared to be in their final stretch.
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Analysts expected a cut, given the gloomier outlook for growth since Trump announced a slew of new tariffs April 2 and subsequently threatened to impose a crushing 50% tariff, or import tax, on European goods
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Germany, which still owns about 12% in Commerzbank, will need some time to form a government after snap elections last month.
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With inflation closing in on its 2% target, the central bank for the euro zone lowered the rate it pays on bank deposits by 25 basis points to 2.5%
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It was the fifth ECB rate cut since June and markets expect two or three more this year
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The cut, the third in a row and the fourth since June, left the Frankfurt-based institution's key deposit rate at three percent.
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The cut, which followed a similar move at the ECB's last meeting in September, put the institution's key deposit rate at 3.25%
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Policymakers need to send confidence-boosting signals to bolster sluggish economies
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The August figure was down from 2.6% in July, according to figures Friday from European Union statistics agency Eurostat. Energy prices fell in August by 3%, helping lower the overall figure, while inflation fell to 2% in Germany, the eurozone’s largest economy.
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Thursday's decision leaves the rate that the ECB pays on bank deposits at 3.75%. Banks can continue to borrow at the central bank's weekly and daily cash auctions for 4.25% and 4.50%, respectively.
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Inflation in the 20 countries that share the euro has fallen from more than 10% in late 2022 to just above the ECB's 2% target in recent months
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The President of Queens College was giving his prediction before the announcement of the policy rates expected at noon (London Time) on May 9
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Fed FOMC sounded more dovish whereas, the ECB and the BoE reiterated their positioning of a ‘higher-for-longer’ stance.
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Officials said they’d accelerate the end of reinvestments under the PEPP bond-buying program, which will put all policy tools into tightening mode, even as fresh projections showed a weaker economy softening the inflation outlook
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The European Central Bank's significant step towards introducing a digital euro in the coming years underscores the need for the latest form of currency to demonstrate its value.
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It marked the 10th straight increase since the central bank launched the most aggressive hiking cycle in its history in July last year after prices surged following Russia's invasion of Ukraine.
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The ECB said in a statement that it expects "that inflation will drop further over the remainder of the year but will stay above target for an extended period".
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Asian stocks fell earlier in the session as markets caught up with growth data from July 17 showing the post-pandemic bounce in China's economy was over.
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Last week's US inflation data fuelled investors' bets that the Federal Reserve was close to the end of its rate hike cycle, and the dollar index had its biggest weekly decline since November 2022
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The boost of a quarter-percentage point, to 3.5 percent, is the eighth straight increase since July 2022 for the 20 countries that use the euro currency.
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With the euro-zone economy faltering, policymakers should signal a pause in rate hikes is imminent
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Lagarde's remarks reinforced her earlier statements indicating the ECB was not done raising rates even after inflation fell by almost a full percentage point in May, to 6.1%.
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Flatlining growth, slowing bank lending, inflation moderating and global banking wobbles all contributed to the ECB's decision to dial down the volume on monetary tightening.
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Core inflation is closely watched by European Central Bank policymakers, who will decide whether to continue raising interest rates to curb inflation when they meet Thursday.
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"The European banking sector is resilient, with robust levels of capital and liquidity," the ECB said in a joint statement with the European Banking Authority.
