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The European Central Bank is likely to keep interest rates on hold next month but discussions about further cuts may well resume in the autumn if the economy weakens, five sources told Reuters. ECB President Christine Lagarde said in July the euro zone's central bank was "in a good place" as it left its key rate at 2%, bringing a year-long cutting cycle to an end and leading investors to bet on a prolonged pause. Data since then showed the euro zone economy was proving more resilient than expected while inflation hovered at the ECB's 2% target, central bank officials in Europe and at the Federal Reserve's Jackson Hole Symposium said. Meanwhile tariffs imposed by U.S. President Donald Trump's administration on European Union imports, at 15% for most goods, were close to the ECB's own expectations and averted the most pessimistic scenarios, the central bank sources said. This meant that a rate cut on September 11 was now largely seen as unnecessary, barring a sudden worsening in incoming data such as a flash inflation reading for August and economic activity surveys, according to the sources. They all declined to be named because policy deliberations are confidential. Equally, the sources noted that the ECB's latest economic projections, which see inflation dipping below its 2% target next year before edging back to it, incorporate a further rate reduction. This meant that discussions about further monetary policy easing were likely to resume at the ECB's October 30 and December 18 meetings, particularly if U.S. tariffs started taking a toll on euro zone exports to its top trading partner or if hopes for an end to Russia's war in Ukraine were dashed, the sources added. An ECB spokesperson declined to comment. Money markets were pricing in some chance of a further ECB rate cut, but not before the spring of next year. Investors have grown more optimistic about the euro zone's economic outlook after surveys showed business activity picked up pace over the summer, with new orders increasing in August for the first time since May 2024. Some policymakers cautioned this may be due to U.S. importers bringing forward orders from the euro zone to beat tariffs, which would imply a reversal in the coming months.

The proposed cut in goods and services tax (GST) rates is being welcomed by consumers, but companies across sectors are reporting a slowdown in sales as buyers wait for lower prices ahead of PM Modi's Diwali gift promise. The changes, if approved, may also create new challenges for India’s electric vehicle (EV) industry. Retailers say demand that usually picks up from Ganesh Chaturthi and Onam has remained muted this year, Times Of India (TOI) has reported. Many buyers are postponing purchases, expecting prices to fall once the GST Council finalises the rate cuts. “We are worried as the festive opening is normally a bumper period, running up to Dussehra and Diwali. But the news of a GST rate cut and impending reduction in retail prices is keeping buyers out of the market till the time a decision finally happens on the ground,” car and consumer goods companies and retailers told TOI's Pankaj Doval. Electronics retailers said shoppers are already asking about reduced prices on TVs, ACs and dishwashers. “We are already getting numerous queries from buyers about price cuts and when they will actually happen. Buyers say they will now wait for the price reduction before taking deliveries,” CEO of one of the top consumer goods companies told TOI. Auto dealers are facing a similar problem. Car bookings are being cancelled, and showrooms are witnessing weak conversions in states like Kerala and Maharashtra. What may get cheaper The government is likely to reduce GST on small cars and two-wheelers from 28% to 18%. For larger TVs, ACs and dishwashers, a similar tax cut is being anticipated. Final changes will depend on the GST Council’s decision. Saharsh Damani, CEO of the Federation of Automotive Dealers Association (FADA), said they have already taken up the matter with commerce minister Piyush Goyal and heavy industries minister HD Kumaraswamy. “We are already seeing pressure in Kerala and Maharashtra when it comes to sales conversions. Dealers are carrying high inventory due to the expected festive rush and if the stock is not liquidated within 60 days, banks will charge higher interest rates (on inventory finance) while slapping penalties. We are seeking help from banks, car and two-wheeler companies and govt. We have been assured of help by both the ministers,” TOI quoted him as saying. Relief for consumers, dilemma for companies While the cuts will help consumers save during the festive season, companies are stuck in a wait-and-watch mode. Brands such as LG, Samsung and Sony have seen sales slowing down as buyers hold back purchases. EV makers fear setback The tax revision may also affect India’s electric car market. Small petrol and diesel cars could move into the 18% slab, making them cheaper and narrowing the gap with electric vehicles, which are taxed at 5%. Analysts warn this could reduce the cost advantage EVs currently enjoy, especially in the entry-level hatchback segment. A report by HSBC Research says EV makers might lose momentum if internal combustion engine (ICE) cars become cheaper. Electric passenger vehicle sales rose 93% in July, led by Tata Motors, but the overall share of EVs in total car sales is still small—about 4.5%. (With inputs from TOI)