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ECB hits pause on rate cuts until September while EUR keeps rising
It seems the European Central Bank is not rushing to hand out any favors to borrowers just yet, choosing instead to take a break until September. According to analysts at Capital Economics, the next rate cut will hardly take place before autumn. The reasons are lingering economic uncertainty, rising trade tensions, and a euro that is behaving like a marathon runner. It gains strength every day.
In June, the ECB encouraged markets by trimming the deposit rate by 25 basis points, the eighth cut in 12 months. As a result, the key rate was down to 2.0%. However, the ECB preferred to keep its concrete roadmap for the rest of the year behind the scenes. In other words, the ECB is keeping markets guessing.
The drop in inflation to the coveted 2% target has slightly cooled expectations, prompting investors to bet on a “summer lull” in July, with another possible rate cut closer to winter. However, according to Franziska Palmas from Capital Economics, the ECB is likely in no rush. It may wait until September to act strictly by the book.
Meanwhile, across the Atlantic, Donald Trump is in top form again. The pause on his trade tariffs expires on July 9, and the EU is already feeling the pressure. As negotiations continue, Brussels is pushing for at least partial relief, especially for particularly sensitive sectors of the economy. The trouble is that no one can seem to agree on what exactly counts as “sensitive.”
In the meantime, ECB officials are keeping a close eye on the euro, which has already gained 14% since the start of the year. Financial minds in Brussels are growing uneasy: an overly strong euro hampers inflation and makes European exports less competitive. ECB Vice President Luis de Guindos even hinted that a rate above $1.20 is more than just a headache—it is a full-blown migraine.
As a result, the rates are on pause, the euro is on steroids, and the ECB remains firmly in a thinking mode.
Published 08 July 2025
© InstaFintech Group
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© InstaFintech Group
