ECB Holds Interest Rates at 2% Amid Eurozone Growth Uncertainty

The European Central Bank (ECB) has kept its key interest rate steady at 2% for the third consecutive meeting, reflecting a cautious approach amid a slow-growth eurozone economy and inflation near its 2% medium-term target. ECB officials emphasized a data-dependent, meeting-by-meeting strategy without providing forward guidance, as economic growth remains modest and external risks, including renewed trade tensions linked to U.S. President Donald Trump's tariffs on EU exports, create uncertainty. Inflation is expected to average around 2.1% in 2025 and gradually decline thereafter, with the ECB projecting modest economic growth of about 1.2% next year. Despite stable inflation readings, the ECB’s revised lower inflation forecasts for 2026 and 2027 suggest a slight easing bias, although the bank maintains that further rate cuts are unlikely given persistent inflation in services and food sectors. The euro weakened slightly following the ECB's announcement, as markets interpret the stance as cautious but open to future policy adjustments depending on evolving data. Overall, the ECB is balancing its goal of inflation stabilization with external economic pressures, relying on flexible policy decisions amid ongoing global uncertainties.