The European Central Bank probably isn’t going to cut interest rates again on Thursday
ByDAVID MCHUGH AP business writer
FRANKFURT, Germany — The European Central Bank will likely hold off on making another interest rate cut Thursday, choosing to wait until it can measure the size of any economic blow from higher U.S. tariffs.
The ECB has already cut rates eight times since June of last year and President Christine Lagarde said after the last policy meeting June 5 that the central bank is “getting to the end of a monetary policy cycle.” The monetary authority for the 20 countries that use the euro currency has been lowering rates to support growth after raising them in 2022-2023 to snuff out inflation caused by Russia’s invasion of Ukraine and the rebound after the pandemic.
With the bench mark rate now at 2%, down from a record high of 4%, analyst think there could be one more rate cut coming, but only in September.
The reason, say analysts: The ECB’s policymakers simply don’t know the outcome of talks between the EU’s executive commission and the Trump administration. Trump first set a 20% tariff for EU goods, then threatened 50% after expressing displeasure at the pace of talks, then sent the EU a letter informing officials of a potential 30% tariff. EU officials earlier held out hope of winning at least the 10% baseline that applies to almost all trade partners, and analysts think that the actual rate may be lower than Trump’s tariff threats. The talks are up against an Aug. 1 deadline, but earlier deadlines have slipped as