After eight consecutive interest rate cuts, the European Central Bank (ECB) is bringing its cycle of reductions to a halt. With eurozone inflation stabilizing around 2%, the ECB has achieved its primary target and now has room to assess the economy’s trajectory—particularly the potential impact of U.S. tariffs on European exports under the trade deal sealed last Sunday.

According to European sources, the ECB would only consider another 0.25 percentage point cut in December if the eurozone experiences a sharp downturn due to tariffs. However, this is not currently viewed as the main scenario.

The Frankfurt outlook on the new Europe-U.S. trade agreement can be summarized as “the lesser evil”, since the 15% tariffs are far lighter than the 30% tariffs previously threatened by former U.S. President Donald Trump. Still, negative effects on key sectors of the European industrial base are considered inevitable, though the exact extent and depth of the impact remain unclear.

For now, the ECB does not plan to revise its inflation and growth forecasts. Inflation is expected to average 2% in 2025, then decline in 2026. Eurozone GDP growth is projected at 0.9% in 2025 and 1.1% in 2026.

Eurostat figures released this week showed that the eurozone withstood global economic turbulence in Q2 2025, which had been triggered by Trump’s tariff threats earlier in the year. Quarterly growth reached 0.1% compared to Q1, while annual growth stood at 1.4%.

However, the full economic impact of the new U.S. tariffs has yet to materialize. Concerns remain over the fragile growth dynamics of the eurozone, particularly among its largest economies:

• Germany: -0.1% quarterly growth in Q2 (0.4% YoY)

• Italy: -0.1% quarterly (0.4% YoY)

• France: 0.3% quarterly growth (0.7% YoY)

The data underline the eurozone’s vulnerability to external shocks, especially as industrial heavyweights face early signs of contraction.