The European Central Bank has kept interest rates on hold as figures showed the eurozone economy maintaining a steady pace of economic growth amid low inflation.

In what was widely expected to be a pause before further cuts later in the year, the Frankfurt-based central bank shunned calls to reduce the cost of borrowing and held its main interest rate at 2% and the deposit rate at 2.15%.

The ECB’s president, Christine Lagarde, said the eurozone was in “a good place” and that the cost of living crisis was in the past. “Our job is now to look at what is coming,” she added.

The ECB, which has cut interest rates eight times in the last nine months from a high of 4%, is watching to see how the EU is affected by higher tariffs on goods exported to the US, which are expected to be part of a trade deal between Washington and Brussels.

This month, Donald Trump threatened a 30% tariff on goods imported from the EU as part of his high-stakes global trade war. Financial markets are hopeful of a deal before the deadline of 1 August after the US reached an agreement to limit tariff increases with Japan on Tuesday.

Central Bank officials are also concerned that an economic slowdown could be married to a drop in prices should China and other east and south-east Asian countries, also hit by US tariffs, dump cheap goods in European markets.

A rise in the value of the euro against a basket of other currencies is likely to make imports to the eurozone cheaper, which could also bring down inflationary pressures.

However, the threat of increased tariff from Washington, and a possible 50% levy on exports of steel to the US, has caused many firms to hold back investment and new hiring.

Annual inflation in the eurozone was 2% in June, up from 1.9% in May. US inflation rose to 2.7% in June from 2.4% in the previous month while inflation hit 3.6% in the UK in June.

Source: Theguardian