The European Central Bank (ECB) held its deposit facility rate—the key rate guiding monetary policy—steady at 2% on Thursday, its first pause since June 2024.

With the economy showing relative strength and U.S. trade negotiations still in progress, analysts had anticipated that the ECB would be in no hurry to cut the benchmark rate further.

EY Ireland Chief Economist Dr Loretta O’Sullivan said that although there is a 2% inflation rate, which is “bang on track”, and the economy is expanding “at a modest pace in July”, the uncertain global environment has caused the ECB to pause rate cuts.

“President Lagarde and her colleagues will be keeping their options open for September’s meeting, assessing the outcome of the trade negotiations between the EU and the US before making their next move.”

Trevor Grant, chairperson of Irish Mortgage Advisors, said: “Today’s decision to pause rate cuts marks a significant shift in ECB policy and could mark the end of its rate cutting cycle.

“Mortgage borrowers and would-be house buyers should therefore exercise a certain amount of prudence. 

"Borrowers should avoid making large financial decisions based on the hope that ECB rates will drop further.  Even if there are one or two more ECB rate cuts over the next year, there may not be much more beyond that.”

Baker Tilly Ireland's Economic Advisor, Joe Nellis, said: "The ECB’s decision to maintain interest rates at 2% signals the end of the aggressive rate-cutting strategy followed over the last year.

"We may see one more cut later this year, but the ECB is waiting to see if the threatened imposition of US tariffs of 30% on EU goods from 1st August can be avoided.

"This is a sensible approach. If a US-EU trade deal isn’t reached beforehand, the ECB may look at cutting rates again in September to counter-act the barriers to economic growth that tariffs will impose."

Fiona McMahon, Senior Mortgage Advisor at NFP Ireland, added: “It could well be the case that the June ECB rate cut was the last reduction of the year.

“The chances of further ECB cuts by the end of this year have been thrown into doubt by the ongoing uncertainty around tariffs as well as the fluctuations in oil prices following an escalation of conflicts in the Middle East.

“Furthermore, if inflation starts to rise, there is a possibility that the ECB might reconsider its approach to interest rates and adjust its rates upwards in the coming years, meaning mortgage borrowers could come under pressure again.”

Photo: Christine Lagarde. Getty