The European Central Bank is likely to keep interest rates on hold next month but discussions about further cuts may well resume in the autumn if the economy weakens, according to five sources,News.Az reports, citing Reuters.
ECB President Christine Lagarde said in July the euro zone's central bank was "in a good place" as it left its key rate at 2%, bringing a year-long cutting cycle to an end and leading investors to bet on a prolonged pause.
Data since then showed the euro zone economy was proving more resilient than expected while inflation hovered at the ECB's 2% target, central bank officials in Europe and at the Federal Reserve's Jackson Hole Symposium said.
Meanwhile tariffs imposed by U.S. President Donald Trump's administration on European Union imports, at 15% for most goods, were close to the ECB's own expectations and averted the most pessimistic scenarios, the central bank sources said.
This meant that a rate cut on September 11 was now largely seen as unnecessary, barring a sudden worsening in incoming data such as a flash inflation reading for August and economic activity surveys, according to the sources. They all declined to be named because policy deliberations are confidential.
Equally, the sources noted that the ECB's latest economic projections, which see inflation dipping below its 2% target next year before edging back to it, incorporate a further rate reduction.
This meant that discussions about further monetary policy easing were likely to resume at the ECB's October 30 and December 18 meetings, particularly if U.S. tariffs started taking a toll on euro zone exports to its top trading partner or if hopes for an end to Russia's war in Ukraine were dashed, the sources added.
An ECB spokesperson declined to comment.
