ECB holds interest rates steady in July amid ongoing uncertainty over US-EU trade tensions.

The European Central Bank (ECB) kept interest rates unchanged at its July policy meeting on Thursday, pausing after eight consecutive rate cuts over the past year that brought rates down from 4% to 2%, including a reduction last month.

This decision comes as inflation in the Eurozone has returned to the ECB’s 2% target and is expected to remain around that level for a while, prompting policymakers to hold steady for now.

The ECB also cited continued uncertainty surrounding trade negotiations between the European Union and the U.S., as talks with the Trump administration have entered their final stage but have yet to produce a formal agreement.

The decision reflects the ECB’s cautious view of the economic outlook, weighed down by short-term risks related to tariffs and trade.

While the central bank noted that the Eurozone economy has shown resilience amid global challenges, it emphasized that the external environment remains highly uncertain, particularly due to ongoing trade tensions.

Some optimism emerged from recent developments suggesting that the U.S. and EU may be nearing a deal that could result in a 15% tariff on U.S. imports of European goods. This outcome would represent a middle ground between the ECB’s baseline and worst-case scenarios presented last month, and well below President Trump’s earlier threat of 30% tariffs.

Policymakers indicated that economic growth could strengthen starting in the fourth quarter if an agreement is reached, easing pressure on the ECB to implement further rate cuts.

The ECB reiterated that future policy decisions will be made on a meeting-by-meeting basis and will depend on its ongoing assessment of inflation and related risks