FX.co ★ ECB to Pause Easing Cycle Amid Trade Uncertainty

The European Central Bank is anticipated to maintain its interest rates on Thursday, signaling a likely end to its current cycle of rate reductions following eight consecutive cuts. These reductions have dropped borrowing costs to their lowest since November 2022, with the main refinancing rate at 2.15% and the deposit facility rate at 2%. In light of ongoing trade uncertainties and the potential imposition of US tariffs, policymakers are expected to adopt a cautious approach, evaluating the repercussions on economic growth and inflation. Inflation recently hit the ECB's target of 2% in June, but it is projected to fall below that mark later this year, remaining low for the next 18 months. This forecast is influenced by a robust euro, declining energy prices, and more affordable imports from China. Financial markets currently anticipate only one more rate cut by December, with about a 50% chance of this occurring in September, before possibly shifting back to tightening by late 2026.