The ECB is expected to hold interest rates steady for the second consecutive policy meeting, confident the eurozone economy can withstand the impact of US President Trump's tariffs and renewed political turmoil in France.

According to a media survey of 59 economists, the ECB is expected to keep its deposit rate unchanged at 2% on Thursday. Analysts believe the ECB's current cycle of rate cuts has ended, and the new quarterly forecasts should ease concerns about inflation falling below 2%.

Most ECB officials are comfortable with current monetary policy, believing inflation is roughly on target and that the 20 eurozone economies have shown resilience in the face of increased US tariffs.

However, policymakers also need to weigh the impending shift in Federal Reserve policy. Markets are betting on a rate cut next week, and if the Fed signals further rate cuts, this could reignite the euro's rally.

Furthermore, the resignation of French Prime Minister Bayrou has heightened political uncertainty. However, barring significant market volatility, ECB President Christine Lagarde is not expected to focus on the situation in her home country at her press conference following Thursday's decision.

Interest Rates

After the European Central Bank slashed its deposit rate from 4% to 2%, hawkish ECB official Isabel Schnabel strongly opposed further rate cuts, saying factors such as trade and increased fiscal spending could lead to higher-than-expected inflation in the coming years.

Other officials also favored holding off. Estonian Central Bank Governor Madis Muller said there was "reason to slowly observe the economic data," while Bank of Finland Governor Olli Rehn said there was "room to think about the next steps."

Bloomberg economist David Powell said the ECB is in no rush to cut rates again. Policymakers are awaiting clearer signs that the economy is responding to trade headwinds, and core inflation has not cooled as significantly as they had hoped.

Money market pricing suggests a less than one-in-three chance of another ECB rate cut this year.