ECB Reveals Expectation to Pause Rate Cuts

(MENAFN) The European Central Bank (ECB) is projected to hold off on reducing interest rates during July, potentially resuming cuts in either September or December.

Mounting unpredictability in the eurozone—largely driven by recent U.S. tariff actions—is anticipated to steer the ECB toward a more cautious, observant stance for now.

This pause comes as policymakers weigh the impact of economic headwinds triggered by international trade tensions.

Notably, the eurozone faces potential fallout from increased U.S. tariffs on European products, which could derail the fragile recovery in its manufacturing industry.

Peter Vanden Houte, the chief economist at ING Group, shared his views with a news agency, remarking that the ECB’s current monetary stance is “in a good place now” and no longer poses a restrictive force on the economy.

“However,” he added, “the latest economic developments seem to suggest some deflationary pressure: the euro has seen a substantial appreciation since the beginning of the year; at the same time, higher than expected US import tariffs on European goods might kill the timid recovery in the European manufacturing sector — this would plead for some additional stimulus.”

Houte also emphasized that the ECB is monitoring inflation trends over the medium term, especially with Germany potentially seeing inflation rebound next year due to significant government spending initiatives.

“All things considered, a wait-and-see approach remains the most probable course of action for the ECB next week,” he concluded.

“With the next potential tariff escalation not expected until Aug. 1, there’s little reason for a preemptive rate cut now, at the same time, the strengthening of the euro since the last meeting has not been strong enough to justify a rate cut next week.”

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