ECB Likely to Maintain Current Interest Rates in September

(MENAFN) The European Central Bank (ECB) is anticipated to maintain its current interest rates at its upcoming September meeting, adopting a cautious “wait-and-see” strategy, while market analysts predict potential rate reductions in December.

Market consensus points toward a steady rate decision next week, with close attention focused on comments from ECB President Christine Lagarde regarding the eurozone’s economic outlook.

Lagarde’s firm stance in July tempered expectations for immediate policy changes that month. Recent developments—including a US–EU trade deal and signs of economic recovery across the eurozone—have revived confidence, pushing back earlier predictions of rate cuts.

Peter Vanden Houte, chief economist at ING Group, told media that the threshold for further rate reductions remains “high” following the July meeting minutes and ECB officials’ remarks.

He explained, “Several more favorable developments over the summer have strengthened the wait-and-see stance: the ‘it-could-have-been-worse’ trade agreement between the US and the EU, a decent second quarter GDP growth reading, and still-improving business sentiment indicators, which have strengthened rather than weakened the case for staying on hold at the September meeting.”

Vanden Houte also pointed out that a slight, unexpected rise in headline inflation last month has reinforced expectations for a pause in rate adjustments.

“We now think that the ECB will likely keep rates at current levels for the foreseeable future,” he said, adding, “an additional rate cut is only possible if the recovery falters or if French political turmoil causes eurozone-wide stress on financial markets.”

Hadrien Camatte, senior economist for France, Belgium, and the eurozone at Natixis, told media that the ECB appears to have delayed any rate reductions until December amid increasing uncertainties.

“The ECB will unveil its new set of forecasts. We expect slight upward revisions regarding GDP growth for 2025 and 2026,” Camatte said. “We believe that a final 25bp rate cut in December is still possible in case labor market softening appears more severe than expected, and inflation drops well below target due to decreasing energy prices and stronger appreciation of the euro.”

Bas van Geffen, senior macro strategist at Rabobank, also spoke to media, noting that ECB doves “don’t have a solid case for another rate cut, as some hawks are starting to think about the future need for rate hikes already.”

He observed, “The French political turmoil and the rise in global ultra-long rates do not warrant a policy response at this juncture.”

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