What to Expect on July 24

Key Takeaways

The European Central Bank is expected to hold interest rates steady on July 24 amid stable inflation and ongoing political uncertainty.Trade tensions with the US and a stronger euro are increasing disinflationary risks, which could prompt rate cuts later this year.September remains a likely date for renewed easing.

The European Central Bank is expected to leave interest rates unchanged at its upcoming meeting on July 24, marking a pause in the rate-cutting cycle that began in June 2024. With inflation hovering around the 2% target and new ECB projections not due until September, policymakers appear in wait-and-see mode as fresh risks – including trade tensions with the United States – cloud the outlook. After eight rate cuts in just over a year, markets and analysts largely agree that July’s meeting will be a quiet one, with attention already shifting to the next decision in the fall.

A recent Reuters poll suggests nearly 60% of economists expect rates to remain on hold in July, with a 0.25 percentage point cut likely in September.

“The ECB’s calls on interest rates have been a large success, cutting fast and hard over the last year or so, particularly considering recent criticism of the US Federal Reserve by the current administration,” says Michael Field, Morningstar’s chief European equity market strategist.

“Investors will not be disappointed that the incremental cuts to rates have come to a halt. 2% represents a very reasonable level for interest rates, one which should be very supportive of businesses across Europe looking to borrow and invest in the coming months, and could potentially bolster equity markets.”

What Are the Key ECB Interest Rates?

As of June 11, the three ECB key interest rates are:

Deposit facility rate: 2.00%

Main refinancing rate: 2.15%

Marginal lending facility: 2.40%

Is the ECB Rate-Cutting Cycle Coming to an End?

ECB officials have been damping down expectations of an imminent interest rate cut. With disinflation broadly proceeding as expected and inflation expectations well anchored, “our interest rates are also in a good place, and the bar for another rate cut is very high,” ECB’s executive board member Isabel Schnabel said in a recent interview with Econostream Media.

“There would only be a case for another rate cut if we saw signs of a material deviation of inflation from our target over the medium term”, she added. “And at the moment, I see no signs of that.”

This cautious tone has been echoed by Bundesbank president Joachim Nagel, a member of the ECB’s governing council. Telling Handelsblatt “a steady-hand approach” was needed, and pointing to ongoing geopolitical and trade tensions, he said their impact on inflation was “highly uncertain.”

A Mixed Picture on Inflation

“There will likely be no change to interest rates in July. The ECB is taking a pause. There have been hardly any comments in the run-up, which shows that the ECB sees itself as well positioned. It’s a working meeting without new projections,” Ulrike Kastens, European economist at DWS, tells Morningstar.

“For us, September remains a month in which another rate cut could happen, even independent of a potential escalation in the trade dispute,” she adds. “The ECB will calibrate its monetary policy to ensure the inflation target is reached. It must respond accordingly to risks.

“In the September growth forecast, we could see a slight upward revision – not a strong one, but the trend is positive. The picture is somewhat more mixed when it comes to inflation. The ECB projects it at 1.6% for 2026, which seems rather low to me. I expect figures closer to 2%. But that could change quickly with the trade dispute. Financial markets are relatively calm at the moment, but a residual risk remains,” according to Kastens.

Deutsche Bank Research economists Marc Schattenberg and Robin Winkler expect two more 0.25 percentage points cuts by December, bringing the deposit rate down to 1.5%.

“In the short term, the trade conflict with the United States poses the greatest downside risk to the eurozone economy. In the longer term, the focus shifts to fiscal policy. The new NATO spending quota will present challenges for some EU member states.”

Carsten Brzeski, ING’s Global Head of Macro, sees the ECB’s “good place” threatened by tariffs and the stronger euro. While the pressure is not enough to justify a cut on July 24, he sees one as “rather very likely at the September meeting.”

Carsten Brzeski, ING

“The stronger euro and the renewed tariff threats are clearly increasing disinflationary pressures for the eurozone, risking inflation undershooting and increasing the likelihood of more ECB rate cuts,” Brzeski says. “However, given the longer-term risks of higher, not lower, inflation on the back of fiscal stimulus, the ECB will be very reluctant to opt for preemptive rate cuts at the current juncture.”

Eurozone Convergence: A Blessing for the ECB

On the plus-side for the ECB, a more unified eurozone recovery with improving labour markets may reduce the risks associated with one-size-fits-all policy mistakes. “The ongoing convergence of labour markets in the eurozone is helping to smooth one of the key challenges the ECB has long faced: divergent economic conditions between north and south. With unemployment falling in southern Europe and rising slightly in the north, the ECB’s monetary policy transmission is becoming more balanced.

“This convergence could be another important reason for relatively narrow government bond spreads in the eurozone and should also make the ECB’s life easier,” says ING’s Brzeski. “With the current convergence and monetary policy at the verge of turning accommodative, the new convergence is a blessing – it could bring some relief for suffering northern economies, without doing any harm in the south.”

What Is the Inflation Expectation?

The ECB is closely watching wage growth as a key driver of underlying inflation, particularly in services. Its Wage Tracker has shown signs of moderating momentum in recent months. Overall inflation is now around the ECB’s 2% target. June’s headline inflation came in at 2.0%, while core inflation – excluding food and energy – was 2.3%.

ECB economists revised their inflation forecasts in June. They now see headline inflation averaging:

2.0% in 2025 (compared with 2.3% in its March forecast)1.6% in 2026 (from 1.9%)2.0% in 2027 (unchanged from March)Does the Strong Euro Pose a Risk?

The euro’s appreciation against the US dollar has raised concerns about disinflationary effects. However, the ECB seems broadly comfortable with the currency’s strength. The euro’s strength is manageable and reflects the new growth narrative in Europe, says the ECB’s Schnabel.

“The current situation risks undermining the exorbitant privilege of the US dollar, a privilege the United States has enjoyed over many decades, which has led to lower financing costs for American households, firms and the government. This offers an historical chance for the euro area to foster the international role of the euro as a global reserve, invoicing and funding currency, to reap some of those benefits. But there are three important prerequisites. The first is a revival of euro area growth. The second is safeguarding the rule of law and security, including in military terms. And the third is a large and liquid EU bond market,” Schnabel adds.

How Do Interest Rate Cuts Affect Investors?

Equity markets tend to rise on anticipated rate cuts. In bond markets, falling interest rates mean lower yields, which pushes bond prices higher. Lower rates also make existing bonds, particularly those already issued during a period of high rates, more attractive on yields.

Meanwhile, savings account rates will fall, which impacts cash savers. Borrowers, by contrast, benefit, as consumer debt and mortgages become cheaper.

When Are the Next ECB Meetings in 2025?

September 11, 2025

October 30, 2025

December 18, 2025