Inflation gradually approaching target, economy showing resilience European Central Bank once again remains on hold.

Despite the pressure brought by the U.S. tariff hikes, the European Central Bank maintained its borrowing costs unchanged for the second consecutive meeting, citing effective containment of current inflation pressures and a steady economic situation in the Eurozone. On Thursday, the European Central Bank kept the deposit rate at 2%, in line with analysts' expectations. Policymakers did not give a clear indication of the future policy direction but continued to emphasize that policy measures will be flexibly formulated based on the latest economic data at each meeting. The European Central Bank stated in its announcement, "The current inflation rate is close to the mid-term target of 2%, and the Governing Council's assessment of the inflation outlook remains overall unchanged." Most officials believe that the current interest rate level is sufficient to address multiple challenges, including the impact of the Trump administration's tariff hikes, geopolitical tensions, and recent market volatility caused by political unrest in France. Currently, the Eurozone economy, comprised of 20 member countries, continues to show growth momentum, with the inflation rate slightly above the 2% target but overall under control. The latest quarterly economic forecasts show that the Eurozone Consumer Price Index (CPI) is expected to rise by 1.7% next year, closer to the target than the previous forecast of 1.6%; however, by 2027, the inflation rate is forecasted to be 1.9%, lower than previously expected. In terms of economic growth, the Eurozone Gross Domestic Product (GDP) is forecasted to grow by 1.2% this year and by 1% in 2026. Earlier, the European Central Bank had cut interest rates eight times within a year until pausing adjustments in July. This series of rate cuts brought its level from a peak of 4% to the current "neutral range" - a level that neither suppresses economic growth nor actively stimulates the economy. Currently, analysts and investors generally believe that the European Central Bank will not further cut interest rates this year. While the European Central Bank remains unchanged, the Federal Reserve is preparing for its first rate cut since December of last year next week. This shift is mainly due to signs of weakness in the U.S. job market, but the U.S. August CPI released on Thursday showed a year-on-year increase of 2.9%, higher than July's 2.7% increase. The European Central Bank expects that the Eurozone inflation rate will not deviate significantly from the 2% target in the medium term. Most officials are confident that the inflation which surged briefly after the Russia-Ukraine conflict has now stabilized. However, some officials have different concerns. Lithuanian Central Bank Governor Gediminas Simkus and others are more concerned about long-term inflation below the target, believing that factors such as a strong euro exchange rate may exacerbate this risk. On the other hand, some officials, including ECB Executive Board member Isabel Schnabel, who has a hawkish stance, believe that the risk of inflation rising is greater and point out that escalating trade tensions and increased European defense spending are the main driving factors. At the same time, the Eurozone economy is showing resilience. Despite the discontent from the industry due to the 15% tariffs imposed on most export goods under the trade agreement reached between the EU and the U.S., market confidence has somewhat recovered, and the manufacturing downturn that lasted for several years is coming to an end. However, this week, the collapse of the French government due to unpopular budget reform plans poses new challenges for the Eurozone economy. On Wednesday, Sebastien Le Cornu was appointed as the Prime Minister of France, making him the fifth Prime Minister in the country in two years.