The ECB keeps interest rates steady despite Trump's instability

BrusselsStability and predictability versus uncertainty and sudden changes. As expected, the European Central Bank (ECB) decided this Thursday to maintain interest rates at 2% for the fifth consecutive time, despite threats from Donald Trump in recent weeks. his offensive against Jerome PowellThe president of the Federal Reserve (the Fed, the central bank of the United States) stated, "The economy continues to show resilience in a challenging global environment." The central bank, Christine Lagarde, emphasized this point at a press conference. The eurozone's central bank has no reason to change interest rates. Inflation is already under control, and economic growth in the countries using the single currency is stronger than initially expected. Specifically, price increases were 1.7% this January compared to the same period last year, according to provisional data from Eurostat, the European Commission's statistical office. As for the increase in gross domestic product (GDP), the ECB's own economic forecasts indicate growth of 1.2% in 2026 and 1.4% in 2027 and 2028. The ECB is particularly focused on core inflation, which is the index that calculates the increase in the price of unprocessed food. At this point, Eurostat estimates that last month's inflation was 2.2% compared to January 2025, one-tenth of a percentage point lower than the rate recorded last December. The central bank's target is to keep it around 2%. It's worth remembering that raising interest rates is the main tool the Frankfurt-based institution has to curb 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 faced with stable inflation around 2% and a healthier economy than expected, it has opted to maintain the rate at 2%.

In this context, and taking into account the factors mentioned, everything points to the ECB continuing to hold firm and maintain the interest rate at 2% during the upcoming meetings of the Governing Council of the financial institution. Despite this, and as usual, Lagarde did not want to take any future decision for granted and insisted that the central bank "does not commit in advance to any specific interest rate path."

Trump's uncertainty

The president of the European Central Bank has emphasized that several factors are influencing the forecasts for higher-than-expected economic growth. Lagarde highlighted the "low unemployment rate" in the eurozone countries, which is at a record low of 6.2%, and the "strength" of the private sector. The French leader also pointed out that "previous interest rate cuts" are boosting economic activity. However, Lagarde lamented that the "outlook is uncertain" due to "global trade policies and geopolitical tensions," a veiled criticism of US President Donald Trump and the trade war he has unleashed, although she did not mention him directly. However, the ECB president pointed out that the military rearmament of European Union member states, as well as large investments in infrastructure, especially in Germany, have positive effects on the increase in GDP (an indicator of the size of an economy) in the eurozone countries. Despite this, the French leader avoided entering into controversies with Trump and his attacks against the current Fed chairman, Jerome Powell. In fact, the ECB president had kind words for Kevin Warsh, the candidate backed by the US president to head the central bank of the American superpower. "I have known him for a long time, since the financial crisis when he was a civil servant and I was finance minister. I very much welcome the announcement of his nomination," added the head of the eurozone's central bank.