Inflation, forecasts remain unchanged, ECB opts for pause on rates

Brussels – The assessment of the inflation outlook “remains more or less unchanged,” and this therefore does not justify a cut in the cost of money. The  Governing Council of the European Central Bank therefore opts for a pause and leaves interest rates unchanged. Thus, compared to the situation in July, not much has changed: uncertainties remain despite the EU-US agreement on tariffs, and in general, in Frankfurt, neither improvement nor worsening of the economic situation can be seen at the moment. Therefore, the path of waiting and caution is chosen, exactly as in the late July session. 

The interest rate on deposits with the central bank thus remains at 2 per cent, the rate on the main refinancing operations remains at 2.15 per cent, and the rate on the marginal lending operations is confirmed at 2.40 per cent. What the level of the rates will be remains to be seen on the basis of the general development of the situation. 

The President of the ECB, Christine Lagarde, reiterates once again that the institution she heads “is not bound to a particular rate path,” and that decisions will continue to be taken “on a case-by-case basis” based on the “assessment of the inflation outlook and associated risks, given new economic and financial data.”

https://www.eunews.it/en/2025/09/01/ecb-experts-high-uncertainty-is-holding-back-households-and-businesses-weakening-policy-impact/ 

Meanwhile, the experts of the European Central Bank draw a similar inflation picture as in June: now the expected inflation is 2.1 per cent in 2025, 1.7 per cent in 2026 and 1.9 per cent in 2027. In essence, the medium-term 2 per cent target is seen as assured, but the absence of signs of improvement leads to remaining on alert. “The trade agreements have to some extent reduced uncertainty, but the overall impact of these agreements will only become clear over time,” Lagarde stressed in relation to the tariff agreements. To which she adds a footnote: “A new deterioration of trade relations could further dampen exports and drag down investment and consumption.” 

In this all-too-unpredictable framework, it becomes even more imperative to “strengthen the eurozone and its economy,” which does not only mean structural reforms and prudent budgetary policies aimed at fiscal consolidation and stability. It means, Lagarde emphasises, that “a year after the publication of Mario Draghi’s report on the future of European competitiveness, it remains essential to follow up his recommendations with further concrete actions and to accelerate their implementation.” 

The ECB president wants to make it clear what the situation is. “We continue to be in a good position,” but if you look at the cost of living trends, “the disinflationary process is over,” and economic expansion is limited. “Higher tariffs, a stronger euro and increased global competition are expected to dampen growth for the rest of the year.” At the same time, Lagarde continued, “the effect of these negative factors on growth is expected to fade next year.”