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 chair of the Federal Reserve (the Fed, the central bank of the United States). "The economy continues to show resilience in a challenging global environment," the president of the financial institution, Christine Lagarde, emphasized at a press conference.

The eurozone's central bank has no reason to change interest rates. Inflation is now under control, and economic growth in the countries using the single currency is stronger than initially expected. Specifically, in January, the price increase was 1.7% compared to the same period last year, according to provisional data from Eurostat, the European Commission's statistical office. And, regarding the increase in gross domestic product (GDP), the ECB's own economic forecasts indicate that it will be 1.2% in 2026 and 1.4% in 2027 and 2028.

The ECB focuses particularly on core inflation, which is the index that most heavily includes energy and unprocessed food. Currently, Eurostat calculates that last month it was 2.2% compared to January 2025, one-tenth of a percentage point lower than the rate recorded last December. The target set by the central bank is for it to be around 2%.

It's worth remembering that raising interest rates is the main tool available to the Frankfurt-based institution to curb inflation, which skyrocketed after the pandemic and with the start of the war in Ukraine. However, it is a double-edged sword and also causes an economic slowdown. That's why the bank always seeks a balance, and faced with stable price increases of around 2% and a healthier economy than expected, it has opted to maintain it 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. 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 regarding Trump and his attacks on 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.