24.07.25 - ECB on pause

Today, the European Central Bank (ECB) kept its key interest rate unchanged at 2.00%, pausing its rate cut cycle after the initial move in June. The decision was widely expected as the ECB assesses incoming data before committing to further easing.

During the press conference, ECB president Christine Lagarde emphasized the ECB’s data‑dependent, meeting‑by‑meeting approach, warning that policy will remain flexible and unconditional on forward guidance, a lot also depending on trade outcomes. She also highlighted certain downside risks to growth and acknowledged that inflation uncertainties remain.

Markets: European equities ended lower after the ECB meeting - the euro initially strengthened, but reversed gains during evening trading - gold moved higher - European bond yields ticked up slightly

My view: The ECB is not ready to commit to the next cut. Growth risks are rising, but inflation is still sticky in parts of the economy and can accelerate depending on trade deal outcome and rising commodity prices.
Lagarde’s cautious tone shows the ECB is walking a tightrope: too dovish and they risk losing credibility, too hawkish and they may tip Europe into deeper stagnation.

The ECB’s decision to maintain rates at 2 % reflects a cautious tactical pause, recognizing that although inflation is on target, external trade shocks, a strong euro, and geopolitical uncertainty justify a measured and flexible stance. The outlook depends heavily on trade developments and evolving inflation trends, with future rate moves to be determined meeting‑by‑meeting.

That’s not supportive for business confidence or long-term planning. With risks of eurozone weakness persisting and limited policy support ahead, the case for a softer euro remains intact despite short-term fluctuations.

Disclosure: Euro fully hedged against the Swiss franc

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