The European Central Bank (ECB) is expected to keep interest rates unchanged at 2% this week, despite mounting economic risks from U.S. President Donald Trump’s threatened 30% tariffs on European goods.
At their final policy meeting before a seven-week summer break, ECB officials are likely to delay any immediate response to Trump’s trade threats, preferring to wait for more data. The next major decision window will be in September, when updated quarterly forecasts are due.
While inflation is currently at target, officials are watching several risk factors, including a stronger euro, which could dampen exports and price growth, and rising political tensions in France over fiscal concerns.
According to economists at Morgan Stanley, ECB President Christine Lagarde will likely reiterate on Thursday that risks to growth remain tilted to the downside but will stop short of committing to new stimulus measures.
A series of upcoming economic reports will guide the ECB’s future actions. These include the bank lending survey (Tuesday), consumer confidence data (Wednesday), and PMI reports from across Europe (Thursday), just hours before the ECB’s announcement.
Meanwhile, EU officials are preparing for a possible no-deal trade scenario with Trump, as the U.S. approaches an August 1 tariff deadline.