The ECB applauds Trump's more conciliatory stance and maintains interest rates: "We are in a good position"

BrusselsThe European Central Bank (ECB) consolidates its inaction and maintains its interest rates. for the third consecutive time at 2%After the significant rise and fall in interest rates, the central bank has found levels it is comfortable with, in a context where inflation is close to its target of around 2%, and the European economy remains sluggish, although it is expected to improve slightly compared to initial forecasts. In this regard, the head of the central bank, Christine Lagarde, has welcomed the thaw in relations. tension between the United States and ChinaThe ceasefire agreement in Gaza, brokered by Donald Trump, and the trade pact between Washington and the European Union.

The ECB president defended the decision at a press conference, stating that "inflation is close to the target," at 2.2%, and that "the economy continues to grow despite the challenging international environment." She also emphasized that the ECB's macroeconomic "forecasts" have "remained virtually unchanged." The Governing Council of the institution, which met exceptionally this Thursday in Florence, Italy, unanimously decided to maintain interest rates at 2%, considering that there are no reasons to lower the cost of money again. "We are in a good position. Not a stable position, but a good position," Lagarde remarked.

However, the French leader insisted that the ECB's upcoming decisions will continue to depend on "macroeconomic indicators" and did not commit to any "specific path" for reducing or increasing interest rates. "The Governing Council's decisions on interest rates will be based on its assessment of the inflation outlook," she reiterated. In this regard, although the ECB president welcomed Trump's easing of trade tensions, she stressed that the context remains "uncertain due to international trade conflicts and geopolitical tensions," especially the war in Ukraine. Furthermore, she reiterated that the consequences of the increased tariffs Trump has imposed everywhere, particularly against the European Union, are still "to be seen" and cannot be analyzed until later.

For now, the ECB is following the path already outlined by the president herself at the press conference following the last Governing Council meeting. The French leader then proclaimed the end of the constant interest rate cuts.

It's worth remembering that raising interest rates is the ECB's main tool for curbing inflation, which soared after the pandemic and the start of the war in Ukraine. However, it's a double-edged sword and also causes an economic slowdown. That's why the central bank always seeks a balance, and with price increases stable at around 2% and an economy performing better than expected, it has decided not to intervene. In this regard, Lagarde welcomed the ECB's previous decisions on interest rates and asserted that it is one of the factors that have significantly contributed to the resilience of the eurozone economies. She also highlighted the strength of the eurozone labor market, which she says has been bolstered by a boost in tourism and hiring in the digital sector, as well as the solidity of private sector balance sheets.

More calm than at the Fed

The ECB usually keeps a close eye on its US counterpart, the Federal Reserve (known as the Fed). Now, however, the situation is different, and Lagarde is much more at ease than the head of the US central bank, Jerome Powell, who is facing increasing pressure from the Trump administration to lower interest rates. In fact, although US inflation is rising, reaching around 3%, the Fed cut interest rates on Wednesday by a quarter of a point for the second time in a row, to 3.75%. However, Powell already dampened expectations in a press conference of another cut at the Fed's next meeting.