ECB Holds Rates Amid US Tariff, Trade Risks

The European Central Bank (ECB) has paused its year-long rate-cutting cycle, keeping interest rates steady at 2% as inflation returns to target and economic resilience is observed in the eurozone. Policymakers, led by President Christine Lagarde, maintain a cautious, data-dependent approach amid uncertainty over US-EU trade talks and the threat of a broad 15% US tariff on EU goods, possibly including cars. Such tariffs are seen as a major risk that could dampen growth and inflation in the region. Market expectations now see less than a 50% chance of another rate cut in September, and only one additional reduction is likely by year-end, if any. The ECB's stance stands in contrast to potential tightening moves in Japan and ongoing global market volatility. While business sentiment remains steady, the eurozone faces potential headwinds if trade shocks worsen or impact the labor market.