ECB holds interest rates at 2%

The ECB’s previous rate cuts, which began in June 2024, have pushed borrowing costs to their lowest level since December 2022 © AFP via Getty ImagesECB holds interest rates at 2% on x (opens in a new window)ECB holds interest rates at 2% on facebook (opens in a new window)ECB holds interest rates at 2% on linkedin (opens in a new window)ECB holds interest rates at 2% on whatsapp (opens in a new window) Save ECB holds interest rates at 2% on x (opens in a new window)ECB holds interest rates at 2% on facebook (opens in a new window)ECB holds interest rates at 2% on linkedin (opens in a new window)ECB holds interest rates at 2% on whatsapp (opens in a new window) Save Olaf Storbeck in Frankfurt and Ian Smith in LondonPublishedDecember 18 2025Jump to comments sectionPrint this pageUnlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The European Central Bank has left its benchmark interest rate unchanged at 2 per cent for the fourth meeting in a row but raised its growth forecast for the Eurozone.The unanimous rate decision was in line with economists’ expectations. ECB president Christine Lagarde said there had not been any discussion at Thursday’s governing council meeting of either rate rises or cuts. She said there had also been unanimity among rate-setters that “all options should remain on the table”.In its second upgrade since March 2024, the ECB now expects 1.4 per cent growth in the Eurozone this year, compared with its last forecast in September of 1.2 per cent. The bank’s staff also raised their 2026 GDP forecast to 1.2 per cent, up from 1 per cent in September. In 2027 and 2028, growth is expected to improve to 1.4 per cent.Lagarde said that Eurozone economy “has been resilient”, despite US President Donald Trump’s tariffs blitz. Annual inflation in the Eurozone, which was unchanged at 2.1 per cent in November, has been within touching distance of the ECB’s medium-term 2 per cent target for nine months in a row. For 2026, the ECB is now expecting annual inflation of 1.9 per cent, compared with the 1.7 per cent it predicted previously. The key reason for higher inflation forecast for next year was that elevated price increases in services would come down “more slowly”, the central bank said. Service price inflation has been well above the ECB’s overall 2 per cent target for the past four years, and accelerated again after the summer, currently standing at 3.5 per cent.“There is no reason for the ECB to change its policy stance any time soon; neither to the upside nor downside,” said Carsten Brzeski, ING’s global head of macro research.The ECB’s previous rate cuts, which began in June 2024, have pushed borrowing costs to their lowest level since December 2022. The euro was slightly stronger by mid-afternoon trading, up 0.1 per cent against the dollar at $1.175.Swaps traders cemented their bets that the ECB had ended its rate-cutting cycle, with a small chance that the central bank could lift its benchmark rate by the end of 2026, according to derivative prices.Based on the updated inflation forecasts, Karsten Junius, chief economist at J Safra Sarasin, said that the ECB considered its current stance “as appropriate” and “doesn’t intend to make another insurance rate cut anytime soon”.Reuse this content (opens in new window) CommentsJump to comments sectionPromoted Content Follow the topics in this article Eurozone inflation Add to myFT Global Economy Add to myFT Central banks Add to myFT Eurozone interest rates Add to myFT European Central Bank Add to myFT CommentsThe European Central Bank has left its benchmark interest rate unchanged at 2 per cent for the fourth meeting in a row but raised its growth forecast for the Eurozone.The unanimous rate decision was in line with economists’ expectations. ECB president Christine Lagarde said there had not been any discussion at Thursday’s governing council meeting of either rate rises or cuts. She said there had also been unanimity among rate-setters that “all options should remain on the table”.In its second upgrade since March 2024, the ECB now expects 1.4 per cent growth in the Eurozone this year, compared with its last forecast in September of 1.2 per cent. The bank’s staff also raised their 2026 GDP forecast to 1.2 per cent, up from 1 per cent in September. In 2027 and 2028, growth is expected to improve to 1.4 per cent.Lagarde said that Eurozone economy “has been resilient”, despite US President Donald Trump’s tariffs blitz. Annual inflation in the Eurozone, which was unchanged at 2.1 per cent in November, has been within touching distance of the ECB’s medium-term 2 per cent target for nine months in a row. For 2026, the ECB is now expecting annual inflation of 1.9 per cent, compared with the 1.7 per cent it predicted previously. The key reason for higher inflation forecast for next year was that elevated price increases in services would come down “more slowly”, the central bank said. Service price inflation has been well above the ECB’s overall 2 per cent target for the past four years, and accelerated again after the summer, currently standing at 3.5 per cent.“There is no reason for the ECB to change its policy stance any time soon; neither to the upside nor downside,” said Carsten Brzeski, ING’s global head of macro research.The ECB’s previous rate cuts, which began in June 2024, have pushed borrowing costs to their lowest level since December 2022. The euro was slightly stronger by mid-afternoon trading, up 0.1 per cent against the dollar at $1.175.Swaps traders cemented their bets that the ECB had ended its rate-cutting cycle, with a small chance that the central bank could lift its benchmark rate by the end of 2026, according to derivative prices.Based on the updated inflation forecasts, Karsten Junius, chief economist at J Safra Sarasin, said that the ECB considered its current stance “as appropriate” and “doesn’t intend to make another insurance rate cut anytime soon”.