The ECB remains unfazed by Trump and maintains interest rates.

BrusselsNo matter how much Donald Trump threatens the European Union or how much he insults European leaders, the European Central Bank (ECB) remains unmoved by the political and economic uncertainty created by the US president. The financial institution continues to rely on its established policies. solely in macroeconomic dataInflation remains around the target of 2%, and the eurozone's economic growth is slightly better than initially forecast. In this context, the institution headed by Christine Lagarde avoided making any changes this Thursday and decided to maintain its interest rates at 2% for the fourth consecutive time. Specifically, the ECB's economic forecasts revise inflation upwards. This year it will remain at 2.1%, as previously indicated, but next year it will be two-tenths of a percentage point higher than initially expected, reaching 1.9%. In 2027 it will fall to 1.8%, and in 2028 it will increase slightly to 2%. Lagarde stated at Thursday's press conference that this slight increase in the rate of price increases is due to the expectation that services inflation will "fall more slowly." Food prices have also risen more than expected, although energy prices have continued to decline. Another contributing factor, according to Lagarde, has been a substantial improvement in wages, which are projected to grow by 4% in 2025. However, they are expected to fall by 3% next year. The financial institution has also increased its economic growth rates for the eurozone compared to the economic forecasts it presented last September. For 2025, the ECB has raised its forecast by two-tenths of a percentage point, to 1.4%; and for 2026 by three-tenths of a percentage point, to 1.2%. In 2027, the gross domestic product (GDP) of the countries using the single currency will grow again by 1.4%, remaining at the same rate in 2028.

The ECB president has indicated that this upward revision, which points to "more vigorous" economic growth than expected, is mainly due to an increase in domestic demand in the eurozone. Also contributing were the strong state of the eurozone labor market—unemployment is at a historic low of 6.4%—the increase in exports—especially in the pharmaceutical sector—an improvement in activity in the communications and information sector, and increased investment in the artificial intelligence sector, as well as in AI infrastructure. "This spending should increasingly boost economic growth," Lagarde emphasized.

Trump's threats

The ECB president has indicated on more than one occasion that the institution is closely monitoring the potential consequences of the White House's increased tariffs on European products, as well as the new threats the Trump administration has issued against the bloc regarding EU regulations in the digital sector and Brussels' fines against major companies. Thus, although the French leader welcomed the fact that international trade tensions have "eased" compared to previous months, she noted that the situation remains "volatile," also due to the war in Ukraine. "The international trade situation could still disrupt supply chains, slow exports, and negatively impact consumption and investment," Lagarde stated.

However, the ECB insists that its interest rate decisions depend primarily on inflation and the health of the economy. "Our decisions depend on the data," the French official emphasized. It's worth remembering that raising interest rates is the main tool the Frankfurt-based institution has to curb inflation, which surged 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 interest rates at 2%.

In this regard, the ECB president avoided revealing the Governing Council's upcoming decisions on interest rates. Lagarde emphasized that the price of money is at a "good level," which does not mean it is a "static" rate. However, she affirmed that there is unanimity within the institution that "all options remain on the table" for the future, including both lowering and raising interest rates. Therefore, everything is still open.