ECB Holds Steady Amidst Trade Uncertainty

The European Central Bank opted to keep its main interest rate steady at 2% in a meeting on Thursday, pausing after a year of policy easing to gain clarity on future trade relations with the United States. With inflation aligning with its 2% target and rates reduced from 4% to 2% since June 2024, the ECB feels no immediate pressure to adjust its stance, leaving investors in suspense about potential future actions.

Adhering to its strategy of assessing each meeting independently, the central bank of the euro zone declared it would refrain from committing to any specific interest rate forecast, making decisions based on new data. "Incoming information aligns with the Governing Council's prior inflation outlook assessment," stated the ECB following a two-day policy session. "Domestic price pressures continue to diminish, with slower wage growth."

Despite this approach, investors remain optimistic about at least one further rate cut this year, influenced by U.S. President Donald Trump's trade war's negative impact on growth and prices. While the outcome of US-EU trade negotiations is still undetermined, sources suggest a potential 15% tariff on EU goods, possibly prompting additional economic support measures from the ECB.

(With inputs from agencies.)