ECB Kept Rates Steady, Holds off on Next Cuts

At its July meeting yesterday, the European Central Bank kept all three key interest rates unchanged, following eight consecutive rate cuts over the past year. The rate decision came in line with market expectations.

ECB Key Interest Rates on July Meeting:

• Deposit Facility Rate: 2.00%
• Refinancing Rate: 2.15%
• Lending Rate: 2.40%

ECB Policy Outlook & Statement

Regarding the policy outlook, ECB President Christine Lagarde emphasized a cautious, “wait-and-see” stance due to elevated uncertainty from ongoing U.S.–EU tariff negotiations.

On inflation, the ECB noted that price pressures currently align with its 2% medium-term target, with moderating wage growth and steady service-sector inflation. However, trade-related risks and the strengthening euro have weighed heavily on the ECB’s policy calculus.

Based on the ECB’s latest tone and positioning, policymakers appear to be setting a high bar for a potential September rate cut, with further easing requiring a clear deterioration in growth or inflation metrics. Markets are now less confident about a move in September.

“This could even be seen as the ‘end of the easing cycle’ for now, unless growth and inflation slow significantly,” said Shawn Lee, Senior Market Analyst at Ultima Market.

“Unless we see a significant negative impact from the U.S.–EU trade talks, the ECB is likely to hold off—preserving space to respond if needed,” he added.

Key Consideration for ECB

June inflation hovered at 2.0%, up from 1.9% in May. Core pressures—especially services inflation and wage growth—remain modest and consistent with the ECB’s medium-term objective. Meanwhile, real incomes and expenditure show signs of resilience despite geopolitical challenges.

The ECB also cited exceptionally high uncertainty due to the U.S.’s proposed tariffs—potentially up to 30%—on European exports. These measures, if implemented, could disrupt supply chains and slow eurozone growth, creating dual risks to both inflation and economic expansion.

Market Reaction: Euro Strengthen Modestly

Euro strengthened modestly, with the EUR/USD pressing near 1.1750, raising concerns about export competitiveness with the significant appreciation of euro.

EUR/USD, 4-H Chart Analysis | Source: Ultima Market MT5

The EURUSD rebounded off the 1.1600 key support this week, the gain were further extend on post-ECB. However, the upside in EURUSD could temporarily capped ahead of the EU-US trade talks.

From technical perspective, the euro is expected to gain its momentum against the US Dollar, until we see a significant shift in the market sentiment.

The Bottom Line

The ECB has paused its rate-cut cycle, signaling that future policy decisions will hinge on incoming economic data and the evolving landscape of global trade tensions. While inflation remains on target, rising trade-related uncertainties have kept the central bank in a cautious, data-dependent stance.

At present, euro strength is largely driven by U.S. dollar weakness, with the ECB’s decision itself having minimal direct impact on the currency. However, volatility may return depending on the progress—or breakdown—of the ongoing U.S.–EU trade talk

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.