The European Central Bank Holds Interest Rates Steady and Confirms the Resilience of the Eurozone Economy

The European Central Bank held interest rates steady at 2% on Thursday, a widely anticipated move, amid assurances from the bank's president, Christine Lagarde, that the Eurozone economy "remains in good shape," despite global challenges and political fluctuations in some member states.

The decision follows a series of cuts seen in the first half of the year, with the European Central Bank maintaining the rate since June, indicating that all monetary policy options remain on the table, including the possibility of returning to monetary easing if necessary.

In a press conference, Lagarde stated that inflation is within target levels, and the uncertainty regarding global trade has begun to ease following the signing of several tariff agreements, most notably the European Union agreement that imposed a 15% tariff on most U.S. imports.

Despite expectations for inflation to fall below the 2% target next year, markets have reduced their bets on a new rate cut, with estimates indicating only a 40% chance of an additional cut by next spring, compared to previous more optimistic forecasts.

Inflation in the Eurozone is expected to reach 1.9% by 2027, with core inflation at 1.8%, reflecting relative stability but still below target levels.

Opinions among members of the European Central Bank's council varied, with hawks believing the economy is resilient against trade tensions, supported by domestic consumption, while advocates of easing warn that tariffs and the effects of U.S. monetary policy could weaken growth and put pressure on prices.

Observers also noted that political unrest in France, which has driven bond yields higher, represents an additional concern for decision-makers at the European Central Bank.