The European Central Bank (ECB) is anticipated to keep its benchmark deposit rate unchanged at 2%, as the eurozone economy demonstrates resilience against U.S. President Donald Trump’s newly imposed tariffs. Despite modest economic growth of 0.1% in the second quarter of 2025 and a positive S&P Global purchasing managers’ index of 51.1 in August, the ECB is opting for caution, with inflation at 2.1%, close to its 2% target.

The European Union’s executive commission has mitigated some concerns by securing a 15% cap on U.S. tariffs on European goods, a significant reduction from Trump’s earlier threats of steeper rates. This agreement provides a degree of trade certainty, though at higher costs, allowing the ECB to maintain its current monetary policy stance while the U.S. Federal Reserve considers a potential rate cut on September 17.

Attention is now turning to ECB President Christine Lagarde’s upcoming press conference, where she is expected to address France’s fiscal challenges. France’s budget deficit, which reached 5.8% of GDP last year, coupled with political gridlock, has increased government borrowing costs in the bond market.

Should a market panic escalate, the ECB could intervene by purchasing French bonds to stabilize rates, but only if France complies with EU debt rules—a condition it currently fails to meet. Holger Schmieding, chief economist at Berenberg Bank, noted, “Lagarde will have to mince her words carefully, neither suggesting a bailout for an unrepentant fiscal sinner nor unsettling markets.”

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The ECB’s decision follows a period of aggressive rate hikes from 2021 to 2023 to combat high inflation, followed by reductions as inflation stabilized. With the eurozone avoiding recession and inflation under control, analysts suggest a potential rate cut later in 2025, though the ECB remains vigilant amid trade uncertainties and France’s fiscal woes.

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