Account of the monetary policy meeting of the Governing Council of the European Central Bank held 23-24 July 2025

High level ECB minutes breakdown:

1. Increased Confidence in Eurozone Growth (Relative to the US): This is the most important development. The minutes explicitly state that the Euro area economy appears "more resilient... than anticipated." Crucially, they contrast this with the US, where they note that "growth forecasts... had been significantly downgraded." This introduction of a relative growth narrative adds a second, powerful pillar of support for the Euro. It's no longer just an ECB rates story; it's now also a story of Eurozone economic outperformance.

2. Divided but Anchored on Inflation: The council is not unanimous, but the overall tone is hawkish. While "several members viewed inflation risks as tilted to the downside" (due to a strong Euro and trade risks), "a few members judged risks to be tilted to the upside" (due to a resilient economy and potential supply shocks). The fact that there's a vocal camp arguing for upside inflation risks means the bar to cut rates due to growth fears is very high. They are not overly concerned about inflation undershooting.

3. Comfort with the Stronger Euro: The ECB is not panicking about the Euro's strength. The minutes directly attribute the appreciation to a "positive relative demand shock" (i.e., the strong EZ economy vs. the weak US). They also suggest a "relatively small pass-through" of the stronger exchange rate to inflation. This signals that they are unlikely to talk the currency down at these levels.

4. A "Robust" Decision to Hold Rates: "All members supported" the decision to keep rates unchanged. They saw a "high option value to waiting" for more clarity on trade negotiations and felt "no immediate pressure to change policy rates." This is a confident, not a panicked, hold. It tells us they are comfortable with their current stance and are not on the verge of easing.