FRANKFURT, Germany (AP) — The European Central Bank kept interest rates on hold Thursday as the economies of the 21 euro-using countries performed well after the turmoil caused by U.S. President Donald Trump. customs duty Understated yet resilient growth.
The bank has kept its standard deposit interest rate unchanged at 2% since June. After a series of cuts from a peak of 4% starting in mid-2024.
“The economy remains resilient despite the challenging global environment,” the ECB said in a statement. It said growth was supported by low unemployment, increased government spending on defense and infrastructure, and a series of previous interest rate cuts.
The lower interest rates were low enough to restart mortgage lending for home sales and new construction due to lower credit costs, boosting growth. Low unemployment rates also support consumer demand for goods, helping to keep the economy resilient without the stimulus of further interest rate cuts.
As a result, analysts believe the euro zone’s main monetary authorities may keep interest rates on hold until 2027. Berenberg Bank forecasts that the euro zone could grow by a stronger-than-expected 0.3% in the past three months of 2025 and reach 1.3% growth for the entire year.
Growth prospects brightened as Germany, the eurozone’s largest economy, is expected to spend more on infrastructure and defense. In France, the culmination of Prime Minister Sébastien Lecorne’s long and difficult fight to pass the 2026 budget – ultimately using special powers to force a deadlocked parliament to vote without voting – has lifted a dark shadow from the eurozone’s second-largest economy.
Meanwhile, energy costs have subsided since a painful spike following Russia’s 2022 invasion of Ukraine.
Europe has weathered months of uncertainty as President Trump threatened to raise tariffs to levels that could hamper much of Europe’s trade with the United States. Ultimately, an agreement with the EU Executive Committee capped the tariff rate at 15%, a significant increase from the previous 4.8%, but not as much as feared. The agreement removed uncertainty and allowed companies to plan. That’s especially despite President Trump’s brief threat to impose additional tariffs on some EU member states that oppose the US’ demands to seize Greenland.
Inflation was below the central bank’s target of 2%, at 1.7% in January. Economists at Berenberg said they expect the central bank to keep interest rates on hold until stronger growth necessitates a rate hike in mid-2027. Raising interest rates combats inflation by raising the cost of credit and suppressing demand for goods bought on credit, from homes to new factories.
