He noted that while a pause in the ECB's recent interest rate cut cycle is a possibility, he is not advocating for a specific decision regarding the current deposit rate of 2.5%.

Earlier this month, the European Central Bank (ECB) reduced interest rates for the sixth time since June 2024, amidst significant economic uncertainty largely attributed to escalating trade tensions.

Analysts are now suggesting that the proposed increase in military spending could lead to rising prices, reinforcing the argument for the ECB to maintain steady interest rates in their upcoming meeting.

Pierre Wunsch, head of the National Bank of Belgium, has indicated that the ECB should consider keeping interest rates unchanged at their next meeting scheduled for April 17, 2025.

European leaders are currently engaged in discussions about increasing military spending, driven by concerns over the reliability of U.S. security support.

In a related move, President Trump has announced a 25% tariff on automotive imports to the U.S., which is expected to negatively impact the European auto industry, including major players like Volkswagen and BMW.

This uncertainty surrounding Trump's tariff policies is raising concerns about potential inflationary pressures and could hinder economic growth in Europe.

Austrian central bank governor Robert Holzmann has expressed support for a potential interest rate pause next month, suggesting that the ECB could still lower rates later in the summer if necessary.