The ECB has decided to maintain interest rates at 2%, signaling the conclusion of aggressive rate-cutting. A potential rate cut later this year hinges on the outcome of US tariffs on EU goods. The ECB is cautious due to geopolitical volatility and inflationary pressures, suggesting that lower rates beyond 1.75% are unlikely. The previous monetary policy of near-zero rates is no longer appropriate for today's economic climate, despite low growth and higher inflation indicating a relatively stable economy.
The ECB's decision to maintain interest rates at 2% signals the end of the aggressive rate-cutting strategy followed over the last year.
The near and below zero rates that defined over a decade of European monetary policy following the Global Financial Crisis may have been deemed necessary at that time but are not where the ECB will look to return to in today's economic climate.
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