The European Central Bank held interest rates steady Thursday, hitting pause after a long streak of cuts as policymakers navigate global economic uncertainty triggered by volatile US trade policy.
The central bank kept the key deposit rate at two percent, as widely expected. It followed a string of reductions beginning in mid-2024 as the ECB lowered rates in response to easing inflation.
t's biding its time while Brussels and Washington negotiate over trade.
The ECB cut its policy rate to 2% last month, halving it from 4% a year earlier, after taming a surge in prices that followed the end of the COVID-19 pandemic and Russia's full-scale invasion of Ukraine in 2022.
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.
The ECB's policy-making Governing Council painted a balanced picture of the economy, with near-term uncertainty over trade offset by public investment further down the road.
"Partly reflecting the Governing Council’s past interest rate cuts, the economy has so far proven resilient overall in a challenging global environment," the ECB said. "At the same time, the environment remains exceptionally uncertain, especially because of trade disputes."
After Thursday's pause, observers will turn their attention to how ECB thinking is developing ahead of its next gathering in September.
"A relatively quiet July meeting could feature some heightened scrutiny on how comfortable policymakers would be with another euro rally," according to ING bank analyst Carsten Brzeski.
Worries over currency fluctuations "may not make their way to official communication, but could help tilt the balance to a more dovish overall tone," Brzeski said.
*With Agency Inputs
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