The European Central Bank (ECB) left its key interest rate benchmark unchanged yesterday as its rate-setting council and ECB President Christine Lagarde take their time to make sure stubborn inflation is firmly under control before lowering rates again.
The decision leaves the deposit rate at 3.75 percent, where it has stood after a single quarter-point cut rate at the previous meeting on June 6.
That means home buyers and businesses hoping for lower interest rates in Europe are going to have to wait at least until the bank’s September meeting for more affordable credit — and possibly even longer than that.
Photo: Alex Kraus, Bloomberg
Lagarde would not commit to a rate cut even at the Sept. 12 meeting, saying that “the question of September and what do we do in September, is wide open and will be determined on the basis of all the data that we will be receiving” ahead of the meeting.
Lagarde was asked at her post-decision news conference about the potential impact of higher US tariffs on imports if former US president Donald Trump returns as president in the November election. “I’m not going to speculate on political developments,” she said.
“Of course, we have to take into account the consequences of, for instance, the increase in tariffs or policies that are determined, outside of the euro area by any country with which we have either strong trade or financial links.” she said.
She added that “obviously, given the size of the US financial markets in particular, the developments taking place in the United States will be very carefully assessed to see what consequences it might have on the European Union and on the euro area in particular.”
The ECB’s stance for now resembles that of the US Federal Reserve, which is expected to hold off lowering rates at its next meeting on July 30-31, though the Fed appears closer to cutting rates after that than is the ECB.
Inflation in the eurozone has fallen from a peak of 11.6 percent in October 2022 to 2.5 percent last month, slowly approaching the ECB’s goal of 2 percent considered best for the economy. But the last mile has been tough. Inflation figure has been stuck between 2 percent and 3 percent for months.
Workers have been negotiating higher wages to make up for lost purchasing power during the inflation spike and annual price increases remain too high at 4.1 percent last month in the crucial services sector.
Meanwhile, higher rates have slowed growth, which is in short supply in the eurozone, with GDP growing a tepid 0.3 in the first three months of the year after months of stagnation around zero.
The anti-inflation campaign has killed off a years-long rally in eurozone house prices, as mortgage costs weigh on home sales. Several eurozone countries including Spain and Ireland have large numbers of people with adjustable-rate mortgages who have faced sticker shock when looking at their monthly payments. Financing costs have also risen for renewable energy projects such as wind turbines, a key part of the EU’s effort to reduce greenhouse gas emissions.
However, the ECB can point to a strong jobs market with low unemployment as a sign that higher rates are not sending the economy into a recession.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his