DWS: ECB is done with rate cuts

DWS: ECB is done with rate cuts

September 12, 2025

Interest Rates ECB

Martin Moryson, Global Head of Economics at DWS, responds to yesterday's ECB meeting:

'As widely expected, the ECB left its key interest rates unchanged. The adjustments to the ECB's projections were also more technical in nature and do not allow any new conclusions to be drawn about future monetary policy. Inflation is where the ECB wants it to be. The European economy has proven to be more resilient than many expected. The risks, especially those for inflation, are more balanced than before, partly because the EU is refraining from imposing retaliatory tariffs on the US, which would have driven up prices.

It must be assumed that, unless the economic situation deteriorates significantly, the ECB is done with its interest rate cuts and will now make decisions based on data from meeting to meeting. If economic conditions or prospects take a turn for the worse, a further cut is likely. Looking ahead to the next year, a resurgence of the tariff dispute with the US is certainly conceivable.

Christine Lagarde’s political (and diplomatic) talent was called upon when the expected question about France was asked. She pointed out the advantages of fiscal rules. In addition, the markets for European government bonds were functioning excellently: properly, smoothly, and with ample liquidity – so her assessment.

She also appealed to politicians to avoid creating further uncertainty in these globally uncertain times. Instead, she said, politicians should increase productivity through structural reforms, as outlined in the Draghi report, and vigorously promote the savings and investment union.'

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