ECB PREVIEW JULY 2025 MEETING

The July ECB decision should be a relatively straightforward affair, with policymakers set to stand pat for the time being, amid still elevated economic uncertainty, and with policy in a 'good place' for now.

There are unlikely to be any fireworks at the conclusion of the July Governing Council discussions, with the deposit rate set to be maintained at 2.00%, likely via a unanimous decision. Money markets price no chance of any action this time out, though do see a 4-in-10 chance of a 25bp cut at the next meeting in September, while fully discounting such a rate reduction by the end of the year.

Along with that decision to hold rates steady, the updated policy statement is likely to be a 'copy and paste' of that issued last time out. Consequently, the GC will likely reiterate that a 'data-dependent' and 'meeting-by-meeting' approach remains appropriate, while also refusing to make any 'pre-commitment' to a particular policy path.

Guidance of this ilk remains suitable, as policymakers seek to preserve as much optionality as possible in terms of future rate shifts, given the incredibly uncertain and cloudy economic outlook.

While there are no new staff macroeconomic projections due this time round, recent 'sources' reports indicate that policymakers will discuss a scenario worse than that outlined at the June meeting, principally reflecting the Trump Administration's recent threats to impose a 30% tariff on EU imports, if a trade deal isn't reached by 1st August. Tariff levels and deadlines remain highly fluid, leaving policymakers reluctant to act on tariff threats alone, given the relatively high probability that they will eventually be walked back.

This leads us to September as the next 'live' ECB meeting, at which point policymakers are likely to possess some degree of increased certainty on the global trade landscape. In any case, risks to the growth outlook will likely remain tilted to the downside, while policymakers should also remain confident that headline inflation will remain at the 2% target for the remainder of the year.

Meanwhile, at the post-meeting press conference, President Lagarde is highly likely to simply repeat recent rhetoric, seeking not to 'rock the boat' before policymakers slip away for their traditional summer break. Lagarde will probably reiterate that the ECB is 'getting to the end of the cycle', while also stressing that policy is in a 'good place'—remarks which rather explicitly hint at the ECB being done and dusted when it comes to interest rate reductions.

Taking a step back, the ECB are near-certain to stand pat at the July policy meeting, as policymakers seek to gently cruise into their summer break. As noted, unless forced by external factors, the ECB would like to wrap up the easing cycle here. That said, it remains plausible that the Governing Council are convinced into delivering another cut, possibly in September, were the euro to strengthen further, or in the event that a US-EU trade deal weren't reached.