Unaltered July inflation rate persists in Germany
The European Central Bank (ECB) has decided to keep its interest rates unchanged at its latest meeting on July 24, 2025. This decision comes after eight consecutive rate cuts over the past year, as the bank looks to maintain stability in the face of ongoing global uncertainties and a strong euro.
According to recent inflation data, the ECB's two-percent target is currently being met by eurozone inflation. In Germany, the eurozone's largest economy, annual inflation stood at 2.0%, a slight increase from the previous month. Prices for goods in Germany saw a small rise, while services inflation slowed a little. The inflation figure in Germany is seen as reassuring to rate-setters at the ECB.
The decision to keep rates unchanged was not unexpected, given the bank's previous actions and current economic conditions. However, the potential impact of tariffs on Europe's economy and the subsequent implications for the ECB's interest rate decisions is a matter of debate among analysts. Some see a possible rate cut by the ECB in September, should tariffs cause cooling in Europe's economy and lead to cheaper exports being sent to Europe instead of the United States.
The ECB ended a streak of cuts stretching back to September 2024 at its last meeting. The bank's main refinancing rate remains at about 2.15%, with the deposit facility rate near 2%. Inflation is forecasted to fall below 2% later this year, remaining subdued thanks to cheaper energy, imports from China, and currency effects.
Looking further ahead, the expectation is for limited further easing in 2025, with maybe one more cut by December, before a potential policy reversal towards tightening starting in late 2026, as inflation dynamics and economic conditions evolve. Market sentiment, supported by economist polls, largely anticipates no rate changes in July, with about 60% expecting a possible 0.25 percentage point rate cut in September 2025.
In summary, ECB interest rates are currently forecasted to hold steady in the short term, with a slight chance of a modest cut in autumn 2025, followed by a possible shift back to rate increases after 2026, contingent on inflation and trade developments. The bank's decision to keep rates unchanged at its latest meeting reflects its cautious approach amid ongoing global uncertainties and its commitment to maintaining the eurozone's economic stability.
[1] Eurozone inflation stabilizes around ECB's 2% target, Reuters, July 24, 2025.
[2] ECB keeps key deposit rate unchanged at two percent, Financial Times, July 24, 2025.
[1] The ECB's decision to keep its key deposit rate unchanged at two percent is a reflection of the bank's commitment to maintaining the eurozone's economic stability, despite ongoing global uncertainties and a strong euro.
[2] The potential impact of tariffs on Europe's economy and the subsequent implications for the ECB's interest rate decisions is a matter of debate among analysts, with some predicting a possible rate cut by the ECB in September, should tariffs cause cooling in Europe's economy and lead to cheaper exports.
