ECB Holds Rates Amid Trump Tariff Fears

European Central Bank Signals Caution on Borrowing Costs

The European Central Bank is poised to maintain its current interest rate, resisting calls for a cut as it awaits clarity on the economic fallout from potential U.S. tariffs. Policymakers are opting to observe the impact of these measures before making any adjustments.

Navigating Economic Uncertainty

In their final meeting before a summer recess, Governing Council members are expected to keep the benchmark interest rate steady at 2%. This decision defers action until President **Donald Trump**’s threatened 30% tariffs become a reality and their economic consequences can be better evaluated.

With many officials anticipating a break, the inclination is to reiterate that inflation is on target and to postpone detailed assessments of the economic outlook until updated forecasts are available in September.

Mounting Headwinds for the Eurozone

Despite the pause, central bank officials are aware of brewing challenges. Beyond tariff concerns, a strengthening euro is dampening price expectations and further pressuring exporters. France also faces potential political instability linked to its public finances.

This backdrop suggests that while the ECB may maintain its “meeting-by-meeting” approach, internal discussions could acknowledge an increasing likelihood of a rate cut in September.

Lagarde to Paint Downbeat Picture

ECB President **Christine Lagarde** is anticipated to characterize the risks to economic growth as “tilted to the downside” in her opening remarks, according to Morgan Stanley economists.

We expect the Governing Council’s language after the July 24 meeting to be similar to the wording in June, leaving open the possibility of additional cuts without committing to them.

— David Powell, senior euro-area economist (@BloombergEconomics) July 22, 2025

Key Economic Data Ahead

Upcoming economic reports will inform the ECB’s deliberations. These include the ECB’s own bank lending survey on Tuesday and consumer confidence figures on Wednesday. Purchasing manager indexes from across the region and other major economies are due Thursday, just hours before the ECB announces its decision.

Further afield, Germany’s Ifo business confidence and Italian economic sentiment data are scheduled for release on Friday.

Investors will also be monitoring inflation numbers from Japan to Brazil, alongside testimony from the Bank of England chief.

Global Economic Watch

North America Braces for Housing Data and Trade Tensions

In the U.S., the economic calendar features housing market reports, with sales of previously owned homes expected to show little change in June. New-home sales are projected to rebound slightly in June after a significant monthly decline, though elevated mortgage rates and affordability issues continue to hinder the market.

Durable goods orders for June are also due Friday, preceded by S&P Global’s July manufacturing and services surveys on Thursday. Federal Reserve officials are in a quiet period before their upcoming meeting, though Chair **Jerome Powell** is scheduled to speak on bank capital frameworks.

In Canada, Bank of Canada surveys will provide insights into inflation expectations and investment plans. Retail sales data may indicate a slowdown as consumers temper spending after an earlier rush for vehicles driven by tariffs.

Asia Tracks Trade and Inflation

Asia’s data releases offer a snapshot of economic performance, with trade figures from South Korea and inflation indicators from Japan, Singapore, and New Zealand expected to reveal how regional economies are adapting to trade-related uncertainties.

South Korea’s trade data on Monday will offer an early look at July exports. China will release loan prime rates, anticipated to remain unchanged.

Australia’s Reserve Bank policy meeting minutes are due Tuesday, potentially clarifying the path toward future rate adjustments. RBA Governor **Michele Bullock** is slated to deliver a speech on Thursday.

Taiwan’s June export orders and employment data are set for release Tuesday. India’s July PMIs on Thursday will gauge manufacturing and services activity. Japan concludes the week with a series of reports, including Tokyo CPI and factory activity, to assess domestic demand and price trends.

New Zealand’s inflation data for the second quarter is due Monday, while Singapore will release its price gauges and industrial production figures on Wednesday and Friday, respectively.

Europe Faces Fiscal Scrutiny and Rate Decisions

The UK’s public finance data, due Tuesday, comes at a time of heightened focus on its economic health and fiscal position. Thursday’s PMI numbers and Friday’s retail sales figures may also attract attention amid faltering growth and rising unemployment.

Bank of England Governor **Andrew Bailey** and colleagues will testify on financial stability to lawmakers, addressing concerns about market stress and potential forced selling by hedge funds.

Inflation data from South Africa and Iceland are also on the agenda, with South Africa’s inflation expected to accelerate in June due to higher meat prices. The latest inflation figures for Iceland are due Thursday.

Several central banks in the region are also set to announce policy decisions. Nigerian policymakers are likely to hold rates steady amid persistent inflation. Hungary’s central bank is also expected to maintain its key rate for a tenth consecutive month, despite a sluggish economy and rising inflation.

The Ukrainian central bank will decide on policy later in the week. Turkish policymakers are anticipated to resume interest rate cuts, while the Bank of Russia has signaled a potential reduction in borrowing costs.

Latin America Eyes Economic Activity and Inflation

Argentina will release May GDP-proxy data on Monday, following a significant economic activity jump in April. Analysts have revised upward their forecasts for the country’s second and third-quarter output.

Mexico’s mid-week economic data releases include economic activity figures and mid-month consumer prices. Despite positive April readings, analysts forecast a shallow second-quarter slump due to various economic headwinds, including U.S. trade policies.

Mexico’s June inflation prints ticked down, and the central bank has indicated a potential slowdown in its easing cycle. Brazil’s mid-month inflation report is expected to show a third consecutive decline, although inflation expectations for 2025 remain above the central bank’s target.