ECB leaves interest rates unchanged as it assesses impact of Trump tariffs
The bank's governing council announced on Thursday at its headquarters in Frankfurt that it would leave its benchmark deposit rate at 2%.
'The economy has so far proven resilient overall in a challenging global environment,' said bank president Christine Lagarde at her post-decision news conference.
'At the same time, the environment remains exceptionally uncertain, especially because of trade disputes.'
The ECB has already cut rates eight times since June of last year and Ms Lagarde said after the last policy meeting on June 5 that the central bank is 'getting to the end of a monetary policy cycle'.
US President Donald Trump sent the EU a letter informing officials of a potential 30% tariff (Julia Demaree Nikhinson/AP)
The monetary authority for the 20 countries that use the euro currency has been lowering rates to support growth after raising them in 2022-2023 to snuff out inflation caused by Russia's invasion of Ukraine and the rebound after the pandemic.
With the benchmark rate now at 2%, down from a record high of 4%, analysts think there could be one more rate cut coming, but only in September.
The reason, say analysts: The ECB's policymakers simply do not know the outcome of talks between the EU's executive commission and the Trump administration.
Mr Trump first set a 20% tariff for EU goods, then threatened 50% after expressing displeasure at the pace of talks, then sent the EU a letter informing officials of a potential 30% tariff.
EU officials earlier held out hope of winning at least the 10% baseline that applies to almost all trade partners, and analysts think the actual rate may be lower than Mr Trump's tariff threats. The talks are up against an August 1 deadline, but earlier deadlines have slipped as the sides kept talking.
With signs of economic activity holding up reasonably well, the ECB can afford to wait and see what the outcome of trade negotiations will be.
Higher tariffs, or import taxes, on European goods would mean sellers would have to either increase prices for US consumers – risking loss of market share – or swallow the added cost in terms of lower profits.
In either case, higher tariffs would hurt export earnings for European firms and slow the economy, which would strengthen the case for another rate cut in September.
The ECB's rate cuts have helped support economic activity by lowering the cost of credit for consumers and businesses to purchase goods. Higher rates have the opposite effect and are used to cool off inflation by reducing demand for goods.
Growth in the eurozone was relatively strong at 0.6% in the first quarter – though that was partly thanks to rushed shipments of goods trying to beat the tariffs.
Inflation has fallen from double digits in late 2022 to 2% in June, in line with the ECB's target. A stronger euro, which lowers the price of imports, and softer global prices for oil have helped keep inflation moderate.
The stronger euro, up 13% this year at 1.17 dollars, has attracted attention as a potential damper on growth and ECB vice president Luis de Guindos said any rapid moves over 1.20 dollars could be 'much more complicated'.
But the ECB typically does not target the exchange rate, and the euro's rise is considered to be less the result of Europe's strength and more the result of a weaker dollar weighed down by investor uncertainty about the future path of inflation, growth and government debt in the US.
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Irish Times
an hour ago
- Irish Times
The good, the bad and the ugly of the EU's budget draft
Earlier this month, the European Commission fired the starting gun on a 30-month marathon negotiation on the EU 's next seven-year budget. Brussels has proposed a nearly €2 trillion common spending pot that it claims faces up to Europe's 'new and emerging challenges'. Does it? First, the good. Brussels has taken some steps towards reallocating funds to today's priorities: infrastructure, defence, security, research and energy and industrial resilience. The exact numbers are already the subject of fights, even inside the commission itself. But just as important is the lack of controversy around the methodological changes to the budget. The commission rolls agricultural subsidie s and transfers to poorer regions into new national plans, to be proposed by governments, approved by the EU and checked against delivery to release funding. This marks a big shift, modelled on the post-pandemic recovery fund. Grumbles can be heard about insufficient funding and a power grab by national governments from local officials. But not about the basic principle of cash in return for demonstrable, mutually agreed reforms. READ MORE That is a quiet revolution from the habit of simply sending cheques to farmers and local governments; the most remarkable thing about the budget draft was the least remarked upon. Another change seemingly received without objection is the streamlining of the budget into fewer funding streams. This simplification should speed up disbursement and ease planning and co-ordination. Next, the bad. The commission has reprioritised its budget with a view to the changing geopolitical landscape. The commission's new spending priorities show it has listened to warnings in the Enrico Letta and Mario Draghi reports. But it has missed the opportunity to integrate budget politics more closely with strategic calls to unify the single market and boost productivity. A case in point is the ill-judged idea of lump-sum taxes on EU companies with large turnover. Brussels is right to seek new revenue sources. But any business levy should be designed within its planned pan-EU corporate code. Getting a share of the corporate tax base from companies choosing this regime is better than slapping a new tax on top of existing ones. The budget also fails to address the need for more equity funding for companies in key strategic sectors, set out convincingly in a report by the European Policy Centre (EPC) that proposes an off-budget instrument resembling an EU sovereign wealth fund making equity investments in the bloc. This is a good idea. So is the EPC's call to securitise EU-funded common European industrial and infrastructure projects. Both would boost the growth of badly needed pan-EU capital markets. A third weakness is the commission's lack of attention to providing investors with pan-EU safe benchmark securities. The budget draft does nothing to promote this. More common debt is a politically explosive idea. But it need not be raised for subsidising poorer members; a stronger justification is to fund an EU sovereign wealth fund. [ Every Irish person contributes €53.20 a month to the EU. We should be prepared to pay more Opens in new window ] Finally, the ugly. Brussels commits the statistical sin of using nominal numbers, which mainly reflect inflation, to claim a large increase in the budget. The relevant measure of resources is the share of gross national income (GNI) the budget allocates to common priorities. The last budget came to a little over 1 per cent of EU GNI. Adding in the special post-pandemic debt-financed fund, the total came to 1.7 per cent. The new draft budget is for 1.26 per cent of GNI, but after deducting the money needed to pay down common debts, it's a mere 1.15 per cent – an amount that will be further whittled down in talks. A proposal to spend a third less of an already tiny share of resources makes a mockery of all the strategic evangelising. This is a budget that ensures continued geopolitical marginalisation. As the great American philosophers Ralph Waldo Emerson and Omar Little have argued, if you 'come at the king, you best not miss'. If the EU wants to hold its own in world affairs, it must give itself the resources for it. Getting more now will be much harder after its initial lowballing. Success is more likely for off-budget ideas such as the EPC's, common borrowing for a sovereign wealth fund and a delay to paying down existing debt to free up funds. Both EU and national leaders accept they face unprecedented, perhaps existential, risks. They must now admit those cannot be addressed on the cheap. – Copyright The Financial Times Limited 2025
The Journal
3 hours ago
- The Journal
How Israeli disinformation is attempting - and failing - to mask the starvation in Gaza
THE IMAGES OF starving children coming out of Gaza recently have been met with alarm by some of Israel's closest allies, and dealt a blow to the propaganda narrative about its siege of the devastated Palestinian territory. The reality of life in Gaza has even led US President Donald Trump to acknowledge that starvation is occurring, as his close ally Israeli Prime Minister Benjamin Netanyahu has continued to deny it is the case. 'There is no policy of starvation in Gaza, and there is no starvation in Gaza. We enable humanitarian aid throughout the duration of the war to enter Gaza – otherwise, there would be no Gazans,' Netanyahu said yesterday. But when Trump was asked yesterday if he agreed with Netanyahu's statement, he said: 'I don't know. Based on television, I would say not particularly, because those children look very hungry.' He also said that he had told Israel to allow 'every ounce' of food into Gaza. 'We can save a lot of people, I mean some of those kids. That's real starvation; I see it and you can't fake that. So we're going to be even more involved.' Today, the Integrated Food Security Phase Classification Initiative (IPC), a UN-backed monitor, said: 'The worst-case scenario of famine is now unfolding in the Gaza Strip.' The UN's World Food Programme has warned that the disaster unfolding in Gaza is reminiscent of famines seen in Ethiopia and Biafra in the 20th century , which resulted in millions of deaths. Trump's assertion that you can't 'fake' images of starving children is telling, especially considering the Israeli government's repeated accusations that Palestinians are lying about the humanitarian situation in the Gaza Strip. Israeli officials have throughout the assault on Gaza – and long before it began in October 2023 – labelled videos and images of Palestinian suffering as examples of 'Pallywood' (Palestinian Hollywood). 'Blood libel' The official account of the Israeli government on X shared a post yesterday that falls into that category of propaganda. The post featured two images side by side: one of an emaciated young boy on the cover of the Italian newspaper Il Fatto Quotidiano, and the other of the same boy looking healthy and alert. The boy is five-year-old Osama al-Raqab and the first photo was taken in Gaza in May. The second photo was taken in Italy last month, where he was transferred for treatment for cystic fibrosis. This is what a modern blood libel looks like: A sick child. A hijacked photo. A lie that spreads faster than truth. His name is Osama al-Raqab. He has cystic fibrosis, a serious genetic illness. He's been in Italy receiving treatment since June 12. Israel enabled his medical… — Israel ישראל (@Israel) July 28, 2025 The Israel account on X said the fact that he was suffering from a genetic disorder disproved claims that he was suffering from malnutrition. 'This is what a modern blood libel looks like: A sick child. A hijacked photo. A lie that spreads faster than truth,' the post said, referring to the medieval, antisemitic myth that Jews drink human blood. The post notes the boy's name and that he has a serious genetic condition. 'He's been in Italy receiving treatment since 12 June. Israel enabled his medical transfer from Gaza,' the post continued. 'But that didn't stop media outlets from weaponizing his image NOT to tell his story, but in order to smear Israel. Because when it comes to Israel, facts are optional. Hate always finds a headline.' The claim from Israel's government that the original photo had been 'hijacked' and presented as evidence of lies about starvation in Gaza is easily debunked. Osama was among a number of starving children whose stories were told in an article published by the Associated Press back in May, before he was taken to Italy. The article said Omar's cystic fibrosis had worsened since the start of the war. A lack of meat, fish and enzyme tablets to help him digest food meant he was in and out of hospital and suffered long bouts of chest infections and acute diarrhoea, his mother Mona told the AP. 'His bones poke through his skin. Osama, 5, weighs 20 pounds (9 kilos) and can hardly move or speak. Canned food offers him no nutrition,' the article said. 'With starvation in Gaza, we only eat canned lentils,' his mother said. 'If the borders remain closed, we will lose that too.' The disinformation the Israeli government has spread about this five-year-old boy has been repeated across many of the state's official social media accounts, as Il Fatto Quotidiano noted in an article about the use of its front page. 'The front page of Il Fatto on 24 July has become a trend on social media,' journalist Riccardo Antoniucci wrote in today's online edition of the paper. Advertisement 'The credit goes to the Israeli Foreign Ministry, which reshared it yesterday, certainly not to praise it, followed by a long list of Israeli embassy accounts around the world (including bots): France, Spain, Latvia, the Czech Republic, Denmark, Chile, Uruguay, Colombia, even Armenia.' As Antoniucci noted in his article, the photo of Osama from May shows him suffering from malnutrition and the second photo shows the difference that proper treatment and sustenance makes when it is actually available. 'Pallywood' conspiracy theory This attempt to portray Palestinians as liars is only the latest example of the Israeli government issuing easily refuted claims about its war on the Gaza Strip. Israeli officials have routinely presented falsehoods as facts, fabricated or mischaracterised evidence and promoted conspiracy theories. The most obvious and swiftly debunked effort to promote the 'Pallywood' myth came just days into Israel's assault on Gaza, when Netanyahu's spokesperson to the Arab world, Ofir Gendelman, posted a video on X that showed make-up artists, actors and a film crew shooting a scene depicting the aftermath of an Israeli strike. The video does show children with make-up applied to make them appear wounded and what appear to be paramedics rushing to help them. Gendelman claimed the video showed Palestinians 'fooling the international media and public opinion'. 'See for yourselves how they fake injuries and evacuating 'injured' civilians, all in front of the cameras. Pallywood gets busted again,' he wrote in the now deleted post. The video is actually behind-the-scenes footage from a short film called The Reality , which is indeed a portrayal of Palestinian suffering, but it was not made in Palestine. Its director, music video maker Mahmoud Ramzi , posted a series of articles in various languages on his Instagram account that debunked the misrepresentation of the footage. Ramzi told the news outlet Reuters that The Reality was 'a short movie that was filmed in Lebanon to show a glimpse of the pain that Gaza's people endured. It was not filmed to mislead people or to fabricate any truth'. In another example, one which bears similarities to the case of Omar al-Raqab, Israel's official X account posted two pictures side-by-side and claimed that both showed the same person apparently pretending to be two different seriously injured men. The pictures were of two different people . There have been many other examples of the 'Pallywood' propaganda trope being spread online, with accusations that Palestinians are 'crisis actors', which is a term used by conspiracists like Alex Jones in the aftermath of school shootings in the United States. More recently, the Israeli military claimed that Hamas has been running 'a deliberate propaganda campaign' about the amount of humanitarian aid Israel is letting into Gaza. 'We operate every day to bring in aid, Hamas operates every day to create a perception of crisis. The international community needs to know the truth!' -COL Abdullah Halabi, Head of the CLA Gaza, on the Gazan side of the Kerem Shalom crossing. — Israel Defense Forces (@IDF) July 25, 2025 In a video posted online by the military last week, colonel Abdullah Halabi said that 'Hamas operates every day to create a perception of crisis'. Standing in front of crates of aid, he blamed the delay in delivering it to Palestinians on the UN, which he said the Israeli military works with closely. 'Israel does not limit the number of trucks entering the Gaza Strip,' he said. This is false, Israel imposed a total blockade on humanitarian aid after it violated a ceasefire with Hamas on 18 March this year. That blockade lasted until late May. Since then, Israel has largely sidelined UN agencies and NGOs in the aid distribution system in Gaza, and replaced them with the Gaza Humanitarian Foundation (GHF), a US-Israeli-backed project with opaque origins and funding. Almost 1,000 people seeking aid at GHF and UN distribution sites have been killed by Israeli and mercenary fire since May , according to the UN. Even before the total blockade, UN and NGO aid agencies had repeatedly urged Israel to allow more trucks to enter Gaza. Today, the NGO Save the Children said that the number of children under five with acute malnutrition seen at its Gaza clinics has surged tenfold in the last four months. According to the UN-backed IPC, one in three people is now going without food for days at a time in Gaza. Hospitals are overwhelmed and have treated more than 20,000 children for acute malnutrition since April and at least 16 children under five have died from hunger-related causes since mid-July. Israel has been accused by human rights organisations Amnesty International and Human Rights Watch of using starvation as a weapon of war. It has also been accused of genocide in a case taken against it by South Africa at the International Court of Justice, and in a statement from UN experts published in May . The ICJ case is ongoing and will likely not conclude until at least 2027. And last year, the international Criminal Court issued arrest warrants for Netanyahu and his former defence minister Yoav Gallant . The warrants are still outstanding and the charges have not yet been ruled on. Among the crimes the two men are accused of is the war crime of using 'starvation as a method of warfare'. Want to be your own fact-checker? Visit our brand-new FactCheck Knowledge Bank for guides and toolkits The Journal's FactCheck is a signatory to the International Fact-Checking Network's Code of Principles. You can read it here . For information on how FactCheck works, what the verdicts mean, and how you can take part, check out our Reader's Guide here . You can read about the team of editors and reporters who work on the factchecks here . Readers like you are keeping these stories free for everyone... It is vital that we surface facts from noise. Articles like this one brings you clarity, transparency and balance so you can make well-informed decisions. We set up FactCheck in 2016 to proactively expose false or misleading information, but to continue to deliver on this mission we need your support. Over 5,000 readers like you support us. If you can, please consider setting up a monthly payment or making a once-off donation to keep news free to everyone. Learn More Support The Journal
RTÉ News
3 hours ago
- RTÉ News
IMF lifts 2025 global growth forecast on tariff distortion
The IMF has today raised its global growth forecast as efforts to circumvent Donald Trump's sweeping tariffs sparked a bigger-than-expected surge in trade, while the US president stepped back from some of his harshest threats. But the International Monetary Fund still sees growth slowing this year, even as it lifted its 2025 projection to 3% - up from 2.8% in April - in its World Economic Outlook update. In 2024, global growth came in at 3.3%. Looking ahead, the IMF expects the world economy to expand 3.1% next year, an improvement from the 3% it earlier predicted. Despite the upward revisions, "there are reasons to be very cautious," IMF chief economist Pierre-Olivier Gourinchas told AFP. "Businesses were trying to frontload, move stuff around, before the tariffs were imposed, and so that's supporting economic activity," he said. "There is going to be payback for that. If you stock the shelves now, you don't need to stock them later in the year or into the next year," he added. This means a likelihood of reduced trade activity in the second half of the year, and into 2026. "The global economy has continued to hold steady, but the composition of activity points to distortions from tariffs, rather than underlying robustness," the IMF's report said. Since returning to the White House, Trump has imposed a 10% levy on almost all trading partners and steeper duties on cars, steel and aluminum. But he paused higher tariffs on dozens of economies until August 1, a significant delay from April when they were first unveiled. Washington and Beijing also agreed to lower for 90 days triple-digit duties on each other's goods, in a pause set to expire August 12, although talks that could lead to a further extension of the truce are ongoing. Trump's actions so far have brought the US effective tariff rate to 17.3%, significantly above the 3.5% level for the rest of the world, the IMF said. US inflation hit Among major economies, US growth for 2025 was revised 0.1 percentage points up, to 1.9%, with tariff rates anticipated to settle at lower levels than initially announced in April. The US economy is also set to see a near-term boost from Trump's flagship tax and spending bill. Growth for the euro area was adjusted 0.2 percentage points higher to 1%, but this partially reflected a jump in Irish pharmaceutical exports to the US to avoid fresh duties. Among European economies, Germany is still expected to avoid contraction while forecasts for France and Spain remained unchanged at 0.6% and 2.5% respectively. While the IMF anticipates global inflation to keep declining, with headline inflation cooling to 4.2% this year, it warned that price increases will remain above above target in the US. "The tariffs, acting as a supply shock, are expected to pass through to US consumer prices gradually and hit inflation in the second half of 2025," the IMF report said. Elsewhere, Trump's duties "constitute a negative demand shock, lowering inflationary pressures," the report added. China challenges Growth in the world's second biggest economy China, however, was revised sharply upwards by 0.8 percentage points to 4.8%. This reflects stronger-than-expected activity in the first half of 2025, alongside "the significant reduction in US-China tariffs," the IMF said. But Gourinchas warned that China is still experiencing headwinds, with "fairly weak" domestic demand. "There is relatively little consumer confidence, the property sector is still a black spot in the Chinese economy, it's not been completely addressed," he added. "And that is resulting in a drag on economic activity going forward." Meanwhile, growth in Russia was revised 0.6 percentage points down, to 0.9%. This was in part due to Russian policies, but also oil prices which are set to remain relatively subdued compared to 2024 levels, Gourinchas said.
