The European Central Bank (ECB) reported that banks deposited approximately €2.7 trillion with the institution overnight on August 19 and 20, 2025. On August 19, the ECB settled €1.94 trillion in public-sector bond purchases and €261.2 billion in corporate bond purchases, with bond holdings under the Pandemic Emergency Purchase Programme (PEPP) at €1.47 trillion as of the previous week. Overnight borrowing by banks from the ECB's loan facilities remained minimal, with €4 million borrowed on August 19 and €6 million on August 20 at the marginal rate. Additionally, there was a noted decline in sight deposits by $2.7 trillion, attributed to the effects of a high interest rate environment.

European Central Bank Governing Council member Olli Rehn warned on Thursday that political pressure from U.S. President Donald Trump is undermining the Federal Reserve’s independence, marking what he called the first serious test of that autonomy in decades. In a speech, the Finnish policymaker said challenging the Fed’s arm’s-length status poses “significant” risks to global financial markets and the real economy. Should the central bank’s independence collapse, Rehn cautioned, inflation would “inevitably pick up” as investors and households lose confidence in the Fed’s commitment to price stability.

The European Central Bank released the accounts of its 23–24 July meeting, confirming that the Governing Council left the deposit facility rate at 2% and judged policy to be in broadly neutral territory after eight consecutive cuts. The minutes show policymakers divided on whether inflation risks are now biased higher or lower, with several members citing weaker demand and the U.S.–EU tariff dispute as downside threats, while others pointed to resilient services prices and stronger domestic demand. Council members agreed that holding rates steady would give them time to assess trade negotiations with Washington and the full impact of past easing. The account also flags that the euro-area fiscal expansion could push the economy’s ‘neutral’ interest rate upward, implying less room for additional cuts, and that the recent appreciation of the euro reflects deeper structural forces unlikely to reverse soon. High-frequency data released the same day underline the Governing Council’s uncertainty. Eurozone consumer confidence was unchanged in August at −15.5, while the European Commission’s economic sentiment index slipped to 95.2. Industrial confidence weakened marginally to −10.3 and services confidence eased to 3.6. Country figures were mixed: Italy’s consumer-confidence gauge fell to 96.2 from 97.2, and Germany’s GfK index sank to −23.6, its lowest reading this year. The soft sentiment readings highlight the fragile backdrop the ECB will confront when it next reviews policy in September.

Euro-zone households continue to see inflation running above the European Central Bank’s target, the ECB’s latest Consumer Expectations Survey shows. The median respondent in July expected consumer prices to rise 2.6% over the coming 12 months, unchanged from June and still higher than the central bank’s 2% goal. Longer-term views were broadly steady. Expectations three years ahead inched up to 2.5% from 2.4%, while the five-year outlook remained at 2.1% for an eighth consecutive month. Perceived inflation over the past year held at 3.1%. The figures arrive as policymakers weigh the timing of potential rate cuts. The Governing Council left its key rate at 2% in July and is widely expected to hold again on 11 September before revisiting the issue later in the year amid mounting economic headwinds, including the impact of U.S. trade tariffs. Persistently above-target expectations could complicate that debate.

A Reuters survey of 72 economists conducted between 11 and 14 August shows the European Central Bank is expected to keep its deposit rate at 2.00% at its September policy meeting. Forty-six respondents predict no change next month, reflecting confidence in a broadly stable euro-area outlook after the European Union concluded a trade agreement with the United States. Views diverge on where borrowing costs will stand by the end of 2025. Thirty-four economists foresee a 25-basis-point cut to 1.75%, 31 anticipate the rate will stay at 2.00%, and seven project a deeper reduction to 1.50%. Any further move is most commonly pencilled in for December, with policymakers judged likely to await additional data before acting. Inflation has eased to the ECB’s 2% target, and the 2% deposit rate sits at the midpoint of the central bank’s estimated neutral range of 1.75%-2.25%. Since June 2024 the Governing Council has lowered the rate by a cumulative 200 basis points. While respondents say the new 15% U.S. tariff on EU goods could damp price pressures, forthcoming fiscal support—particularly from Germany—should help keep growth near trend.

European Central Bank President Christine Lagarde said Europe’s labour market has remained significantly stronger than economic models predicted, with employment rising 4.1% between the end of 2021 and mid-2025. Speaking at the Federal Reserve’s Jackson Hole symposium, she described the outcome as remarkable given the sharp inflation shock and the ECB’s aggressive interest-rate increases over the past three years. Lagarde credited the resilience to easing supply constraints, lower energy prices, temporary fiscal support and shifts in working patterns, which together allowed inflation to retreat "at a remarkably low cost" to jobs. While policymakers have paused further moves after eight rate cuts, keeping the deposit rate at 2% since July, she cautioned that the unusual mix of tailwinds may fade and demographic pressures could curb productivity unless offset by technology and artificial intelligence. Inflation is projected to converge on the ECB’s 2% goal by 2027. Turning to trade policy, Lagarde argued that Washington’s new 145% tariff on Chinese goods should inflict only a small drag on euro-area output. She said European companies will adapt to the higher levies and that the measures are unlikely to derail what she described as a resilient—if "not thriving"—regional recovery.

The European Union is accelerating the development and launch of its digital euro stablecoin, aiming for deployment as early as October 2025. This move follows the United States' passage of a landmark stablecoin law, known as the GENIUS Act, which has intensified pressure on the EU to maintain financial competitiveness and sovereignty. European policymakers and the European Central Bank (ECB) are considering issuing the digital euro on public blockchain platforms such as Ethereum or Solana, shifting away from previously favored closed, centralized systems. The decision to explore public blockchains is partly motivated by concerns that American legislation could spur the growth of USD-denominated tokens and further strengthen the dollar's dominance. The ECB has allocated a budget exceeding one billion euros for the digital euro project, with plans to acquire software from Accenture, although a clear adoption strategy has yet to be established. The digital euro initiative is also viewed within the broader context of a new currency rivalry involving the US stablecoin framework and China's digital yuan, highlighting the geopolitical and monetary discipline implications for Europe. Discussions continue about the potential regulatory and societal impacts of the digital euro, including its influence on privacy and consumer behavior.

The European Central Bank said commercial lenders placed about €2.7 trillion in its overnight deposit facility on 19 August, underscoring the abundance of excess liquidity in the euro-area financial system. By contrast, banks tapped only €4 million from the ECB’s marginal lending window, a negligible amount that indicates limited short-term funding stress. Separately, Europe’s biggest banks have been setting aside less capital than analysts anticipated to cover potential defaults on deteriorating credit portfolios. The combination of lighter-than-expected loan-loss provisions and the continued parking of large cash balances at the ECB suggests that, for now, the region’s lenders remain confident in their balance-sheet strength despite a weakening economic backdrop.

The European Central Bank warned that heightened US tariffs on Chinese goods may prompt exporters in China to redirect shipments to Europe, intensifying competitive pressure on European producers and threatening euro-area jobs. In a box published in its latest Economic Bulletin, the ECB calculates that sectors already facing strong Chinese competition—such as vehicles and chemicals—have suffered sharp declines in labour demand and could experience further losses if trade diversion accelerates. Imports from China rose by 150% for vehicles and 140% for chemicals between 2019 and 2024, while published job vacancies in those industries fell 55% and 95%, respectively. Overall, industries exposed to Chinese competition employ about 29 million people, or 27% of the euro-area workforce, the ECB said. Applying historical trade data, the central bank estimates that every €1,000 increase in Chinese imports per worker within a sector reduces that sector’s employment rate by 0.1 percentage point, translating into roughly 240,000 jobs displaced or reallocated across the bloc between 2015 and 2022. The ECB cautioned that the United States’ 145% tariff on Chinese goods, in place since April, could magnify these trends by driving more Chinese exports toward Europe. While some European firms may gain a price advantage in the US market, the central bank doubts that will offset mounting competitive pressures at home and urges policymakers to prepare for labour-market adjustments.

European Central Bank President Christine Lagarde said on Monday that recently imposed trade tariffs are expected to have only a marginal impact on Europe’s gross domestic product. Lagarde added that European companies are likely to adapt to the higher U.S. duties, limiting the broader economic fallout she anticipates from the measures.

European Central Bank policymakers intend to leave borrowing costs unchanged for the time being, signaling that a recently concluded trade agreement will not prompt an earlier shift in monetary policy. Officials reiterated their commitment to a steady-rates path, indicating they will take additional time to gauge the accord’s impact on inflation and growth before considering adjustments. Investment bank Morgan Stanley updated its outlook in response to the ECB’s stance, moving its projected timeline for the first rate reduction to December, followed by another cut in March. The firm had previously anticipated cuts in September and December. The revision underscores a broader market view that the ECB is prepared to wait several more months before beginning any easing cycle.

Negotiated wages in the euro area rose 3.95% year-on-year in the second quarter, up sharply from 2.5% in the first three months of 2025 and above the European Central Bank’s wage-tracker projection of 3.4%. The pickup reverses the brief moderation seen earlier in the year and underscores continued pressure on labor costs across the currency bloc. The rebound in wage growth is likely to reinforce caution at the ECB, which has already signaled a pause in policy easing for the summer as it assesses whether inflationary pressures are subsiding fast enough to warrant further rate cuts. Persistently strong pay increases risk feeding into consumer prices, complicating the central bank’s effort to return inflation to its 2% target.