ECB officials sticking to steady interest rates

European Central Bank officials are increasingly convinced they can keep interest rates unchanged in September, according to people familiar with the matter who don't see the trade deal between Brussels and Washington causing major economic concerns.

Since rates were left at 2% last month, growth and inflation have developed largely in line with the ECB's June outlook, said the people, asking not to be identified discussing confidential debates. That foresaw price pressures dipping in 2026 before hitting the 2% goal again in 2027.

September's quarterly forecasts are widely expected to confirm such a scenario, the people said. That would cement arguments by some officials that the ECB is done cutting rates and should preserve policy space for future shocks, while assuaging concerns by others over a persistent inflation undershoot, they said.

An ECB spokesperson declined to comment.

After eight quarter-point cuts in a year, the ECB signaled in July that the bar for further moves is high. Data since have revealed unexpected growth for the the euro zone's 20-nation economy and slightly faster than anticipated inflation.

While data Friday showed that the second-quarter contraction in German output was worse than initially thought, hope remains that the continent's biggest economy will find its feet once a glut of public spending on infrastructure and defense filters through.

There's also much more clarity on trade following a deal between the European Union and the US, though policymakers remain on alert with some questions still open and President Donald Trump known for sometimes changing his mind abruptly.

"Recent trade deals have alleviated, but certainly not eliminated, global uncertainty, which persists on account of the unpredictable policy environment," President Christine Lagarde said Wednesday. The tariff now in place is a little above the level the ECB assumed in June but "well below" a severe scenario it had also mapped out, she said.

Underscoring those sentiments, business surveys published Thursday by S&P Global showed activity hit a 15-month high in August, but they also revealed weakness in exports orders.

Still, policymakers don't see any merit in propping up the economy with a so-called insurance cut, the people said, citing concerns that such a move would fuel unjustified speculation about deteriorating prospects and the need for a series of additional rate steps.

Another serious blow to the economy or a steep downgrade in the inflation outlook, though unlikely, could still convince officials to lower rates once more this year, they said.