The European Central Bank kept interest rates steady at 2% on Thursday to assess Europe’s trade relations with the US. The euro traded lower at $1.1733 after positive US jobless data. Euro area bond yields and European shares remained higher. The STOXX 600 index rose by 0.46%.

Analysts suggest the ECB’s pause may be temporary or lead to a rate hike if trade uncertainty diminishes. Markets speculate on another 25-bp rate cut by year-end. ECB President Christine Lagarde’s guidance is seen as reactive, waiting for data before making decisions.

The ECB’s decision to maintain rates at 2% aligns with the neutral range. Uncertainty persists, and further easing may be needed if trade tensions escalate. Analysts believe the ECB may not cut rates further, with Germany’s economic reflation potentially leading to an upward rate shift.

The ECB’s decision to keep rates unchanged reflects concerns about disinflation and potential deflation risks. A stronger euro, US tariffs, and Chinese competition pose challenges. The Governing Council may need to cut rates more aggressively to combat deflation. Markets await further guidance from the ECB.

Read more at Yahoo Finance: ECB leaves rates steady after a year of easing