ECB Weighs Inflation Risks in Potential Rate Decisions

ECB chief economist Philip Lane said shifts in the euro‑zone inflation risk profile will guide policy, with a rise in downside risks strengthening the case for a slight cut and stronger upside risks arguing for holding rates. The bank trimmed policy rates by about two percentage points through June and has been on hold at roughly 2%, leaving policymakers debating further easing versus staying put. Vice‑President Luis de Guindos and Lane described risks as broadly balanced and signalled little urgency to change the current stance, while financial markets see almost no chance of another cut this year. Some policymakers warned that a stronger euro and the lagged effects of U.S. tariffs could push inflation below the ECB’s 2% target. Lane cautioned that persistent euro appreciation—especially if driven by external factors—can have multi‑year effects on activity and inflation, so the ECB will monitor global and currency developments closely and stand ready to ease slightly if downside risks intensify.