ECB policy: Rates left unchanged at 2% as eurozone weathers Trump tariffs; Christine Lagarde faces France test

The European Central Bank (ECB) kept its benchmark deposit rate steady at 2% on Thursday, with inflation back under control and the eurozone economy showing resilience despite US President Donald Trump’s tariff measures.At the post-decision news conference, attention is expected to focus on ECB President Christine Lagarde’s remarks on France’s fiscal crisis and whether the bank could step in if market turmoil deepens due to the country’s rising deficit and political deadlock, AP reported.The ECB’s move comes as the US Federal Reserve signals the possibility of a rate cut at its September 17 meeting. Eurozone growth held at 0.1% in the second quarter, avoiding recession despite tariff disruptions, while S&P Global’s purchasing managers’ survey for August stood at 51.1, indicating expansion.Inflation in the eurozone was 2.1% in August, close to the ECB’s target. Having raised rates sharply between 2021 and 2023 to curb inflation, the bank has since lowered them as growth concerns mounted. Analysts believe another cut could follow in the coming months.The European Commission has also eased trade tensions by capping US tariffs on European goods at 15%, higher than pre-Trump levels but below the steeper rates initially threatened.France’s fiscal deficit, at 5.8% of GDP last year, has pushed up borrowing costs, fuelling market unease. Lagarde faces the challenge of signalling readiness to act in case of panic without suggesting that the ECB would bail out governments unwilling to rein in deficits.