ECB Keeps Rates Unchanged to Wait for Clarity on US Tariffs
Bloomberg2 days
ECB Holds Rates Steady at 2%
Above: Christine Lagarde in Frankfurt, Germany, on Thursday, July 24, 2025. Image copyright: Alex Kraus/Bloomberg/Getty Images
The Spin
Narrative A
The ECB's pause makes perfect sense given current conditions. Inflation is right at target, the economy shows resilience with solid growth, and unemployment remains historically low. It's also important to note that Europe's inflation is mostly untethered from tariff concerns, meaning that the bank must be conservative with rates cuts and not abandon sensible planning.
Narrative B
This pause could be a mistake if trade tensions escalate. Higher tariffs will slam European exporters and drag down growth, making another rate cut inevitable by September. The ECB should have acted preemptively rather than waiting for damage to materialize, especially if the notoriously capricious Trump opts for a much higher tariff rate, which would cause serious economic damage.