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4d ago

ECB Pauses Rate Cuts as US Tariff Threats Loom

Policymakers await clarity on whether the United States will impose a 30% duty or settle on a 15% tariff by August 1.

FILE - The sun sets behind the European Central Bank, right, and the buildings of the banking district in Frankfurt, Germany, Tuesday, July 1, 2025. (AP Photo/Michael Probst, file)
European Central Bank (ECB) President Christine Lagarde addresses the media after the ECB's Governing Council meeting, at the ECB headquarters in Frankfurt, Germany, June 5, 2025. REUTERS/Heiko Becker/File Photo
European Central Bank (ECB) President Christine Lagarde addresses the media after the ECB's Governing Council meeting, at the ECB headquarters in Frankfurt, Germany, June 5, 2025. REUTERS/Heiko Becker/File Photo
The European Central Bank headquarters in Frankfurt am Main

Overview

  • The ECB paused its easing cycle on July 24, holding the deposit rate at 2% after seven consecutive cuts since mid-2024.
  • Eurozone inflation has stabilized at the central bank’s 2% target, reducing immediate pressure for further policy adjustments.
  • Officials flagged uncertainty over President Trump’s threatened 30% tariff and reports of a possible 15% compromise as key factors behind the hold.
  • Markets are pricing in one more ECB rate reduction by December in anticipation of potential trade shocks and growth headwinds.
  • The euro has climbed to multi-year highs against the dollar, reflecting diverging monetary paths and tariff-related investor flows.