Euro Area Interest Rate

The ECB’s July meeting minutes showed policymakers split over the outlook for inflation. Some argued that risks were tilted to the downside over the next two years, pointing to weaker growth prospects and the impact of U.S. tariffs. Others warned that risks could still be to the upside, especially longer term, given uncertainties around energy and currency movements. While inflation was at target, officials noted this was partly driven by temporary factors that could reverse, underscoring the ongoing debate over whether the ECB should lean toward caution or vigilance in setting policy. The ECB kept interest rates unchanged in July, effectively marking the end of its current easing cycle after eight cuts over the past year that brought borrowing costs to their lowest levels since November 2022. The main refinancing rate remains at 2.15%, while the deposit facility rate holds at 2.0%.