FRANKFURT — The European Central Bank was set to keep interest rates on hold on Thursday, pausing after seven straight cuts as it waited for the fog surrounding Europe’s trade relations with the United States to clear.
The ECB has halved its policy rate from 4 percent to 2 percent in the space of just one year after taming a surge in prices that followed the end of the COVID-19 pandemic and Russia’s invasion of Ukraine.
With inflation now back at its 2 percent goal and expected to stay there, euro zone central bankers were likely to stay put this week and observe what kind of tariffs President Donald Trump’s US administration would impose on the European Union after an August 1 deadline for talks.
“The ECB is widely expected to keep policy on hold this week, as uncertainty prevails with no trade deal yet on the horizon between the US and EU,” Christophe Boucher, chief investment officer at ABN AMRO Investment Solutions, said.
The tense and unpredictable trade talks between Washington and Brussels have made policy-making difficult.
Trump’s threat to impose a 30 percent duty on EU goods exported to the United States – a steeper tariff than the ECB had anticipated under even the most negative of three scenarios it released last month – has forced President Christine Lagarde and her colleagues on the ECB’s Governing Council to contemplate lower outcomes for growth and inflation.
