As widely expected by the markets, the European Central Bank (ECB) kept interest rates unchanged this month. At its July 24 meeting in Frankfurt, the ECB announced it would hold its three key interest rates steady, with the benchmark rate remaining at 2%. This decision had already been largely priced in, and the euro held steady against major currencies following the announcement.

During the post-meeting press conference, ECB President Christine Lagarde noted that recent data shows inflation across the eurozone continues to ease, while wage growth is also beginning to slow. These trends suggest that previous rate cuts are starting to have the intended effect. However, she warned that geopolitical tensions and uncertainties in the global economy—particularly escalating trade friction with the U.S.—pose challenges to Europe’s economic outlook.

Since launching its rate-cutting cycle in June 2024, the ECB has lowered rates a total of eight times over seven consecutive meetings. With inflation now back within its 2% medium-term target range, the central bank has opted to pause and assess the impact of its policy moves. Lagarde emphasized that future decisions will remain data-driven and will be evaluated on a meeting-by-meeting basis. She also revealed that fresh economic forecasts will be released in September, which could influence the bank’s policy stance depending on how the data unfolds.

While many analysts still believe another rate cut is possible later this year, the ECB has made no commitments and continues to stress a cautious, flexible approach. Key indicators like inflation trends, labor market data, and developments in international trade will play an important role in shaping future decisions.

Recent U.S. tariffs on European goods have added pressure on the region’s exports, complicating the ECB’s policy calculus. Officials acknowledged that trade tensions could significantly impact the economic environment, and even minor shifts may prompt the central bank to re-evaluate its course. The situation will remain under close watch in the coming months.

Overall, the ECB’s decision to stay on hold reflects its attempt to strike a balance between stabilizing prices and navigating an uncertain economic outlook. With inflation receding, the bank now has the space to wait and see how the economy responds—allowing for flexibility to adjust policy if needed down the line.