ECB holds rates steady amid slightly softer inflation outlook

The European Central Bank (ECB) opted to keep interest rates unchanged on Thursday, as inflation eased and the eurozone economy showed unexpected resilience despite ongoing trade tensions sparked by US tariffs. The bank’s rate-setting council maintained the benchmark deposit rate at 2% following a meeting at its Frankfurt headquarters.Attention across Europe is now focused on France’s escalating fiscal crisis and the potential role the ECB might play in stabilising markets if turmoil arises from the country’s mounting deficit and political deadlock.ECB President Christine Lagarde said after the decision that monetary policy was “in a good place” and that decisions would continue to be made “meeting by meeting.” She gave no indication of future rate moves, emphasising that the bank is “not on a predetermined path,” according to the news agency Associated Press.While the ECB held firm, the US Federal Reserve has kept open the possibility of a rate cut at its upcoming meeting on 17 September.The ECB’s deposit rate is a critical lever influencing borrowing costs throughout the eurozone economy. The bank had raised rates aggressively during 2021-23 to combat a surge in inflation but has since reversed course as inflation moderated and growth concerns mounted. While higher rates help curb inflation, they risk slowing economic growth, whereas lower rates can stimulate activity by making borrowing cheaper.Eurozone inflation stood at 2.1% in August, close to the ECB’s target of 2%. Given the stable inflation and steady growth, there was little impetus for the ECB to alter rates this month, though analysts suggest a rate cut may be on the horizon in the coming months.(Edited by : Ajay Vaishnav)First Published: Sept 11, 2025 6:09 PM IST

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