Particle.news

Download on the App Store

ECB Pauses Interest Rate Cuts as Inflation Hits 2% Target

Heightened US-EU trade tensions coupled with a strong euro prompted the pause, with policymakers awaiting fresh data ahead of a potential September cut

Image
Image
Der Kreml (l) und die Basilius-Kathedrale (r) auf dem Roten Platz.

Overview

  • At its July meeting the ECB left its deposit rate at 2.00 percent, its main refinancing rate at 2.15 percent and its marginal lending rate at 2.40 percent after eight reductions since last summer
  • Eurozone inflation slowed to exactly 2 percent in June, matching the ECB’s medium-term objective and underpinning the decision to halt easing
  • Governing Council members split over next steps, with Bundesbank chief Joachim Nagel and board member Isabel Schnabel urging caution on further cuts
  • Financial markets broadly price in a renewed rate reduction in September as observers watch trade disputes and fresh economic data
  • Consumers earn on average 1.3 percent on overnight deposits and 1.75 percent on one-year term deposits while mortgage rates stand around 3.66 percent, and banks have largely maintained loan margins despite falling funding costs