The European Central Bank (ECB) announced on Thursday a decision to pause and maintain interest rates, aligning with expectations.
“The Governing Council of the European Central Bank (ECB) decided today to keep the ECB’s three key interest rates unchanged. Inflation is currently around the medium-term target of 2%, and the Governing Council’s assessment of the inflation outlook remains broadly unchanged,” the ECB stated in a press release.
Thus, “the interest rates on the deposit facility, the main refinancing operations, and the marginal lending facility will remain unchanged at 2.00%, 2.15%, and 2.40%, respectively.”
ECB Forecasts
The ECB further notes that the “latest projections by ECB experts present an inflation outlook similar to that provided in the June projections”:
“They point to average overall inflation rates of 2.1% in 2025, 1.7% in 2026, and 1.9% in 2027. Regarding inflation excluding energy and food prices, they show an average of 2.4% in 2025, 1.9% in 2026, and 1.8% in 2027,” it reads.
Moreover, “the economy is projected to grow by 1.2% in 2025, an upward revision from the 0.9% reported in June. Growth for 2026 is now slightly lower at 1.0%, while the projection for 2027 remains unchanged at 1.3%.”
“The Governing Council of the ECB is determined to ensure that inflation stabilizes at its 2% medium-term target. It will follow a data-dependent and meeting-by-meeting approach to decide the appropriate stance of monetary policy. Specifically, the Governing Council’s decisions on interest rates will be based on its assessment of the inflation outlook and the risks surrounding it – in light of the economic and financial data available – as well as underlying inflation dynamics and the strength of monetary policy transmission. The Governing Council does not pre-commit to a specific rate path,” the note states.
The ECB also reveals that “asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace as the Eurosystem has ceased reinvesting the principal payments from maturing securities.”
Is the ECB Ready to Act?
The institution adds that the “ECB Governing Council stands ready to adjust all instruments within its mandate to ensure that inflation stabilizes at its 2% medium-term target and to preserve the smooth function of monetary policy transmission”.
“Moreover, the Transmission Protection Instrument is available to counter unjustified, disorderly market dynamics that could pose a serious threat to monetary policy transmission across all euro area countries, allowing the ECB Governing Council to more effectively fulfill its price stability mandate,” it concludes.
[Updated at 13:22]
