“At this time, we are in a good position and well-prepared to face future shocks,” stated Christine Lagarde in mid-October during the International Monetary Fund’s annual meeting in Washington.
Markets await the same message: no turnarounds, no change in direction.
Almost all observers predict that the ECB will maintain the deposit rate, which serves as a reference, at 2.0%, as it has since July.
“The ECB meeting appears quite uneventful: a moment of follow-up rather than action, with cautious comments about growth and inflation,” explains Michel Martinez, chief economist for Europe at Société Générale.
Economically, the ECB can partially breathe a sigh of relief.
Despite the still heavy geopolitical climate, with Russia’s invasion of Ukraine showing no end, “the ECB is currently operating in a relatively comfortable economic context,” says Felix Schmidt, an economist at Berenberg.
After two years of successive rate cuts, the ECB benefits from a drop in inflation from 10.6% in 2022, amid rising energy prices linked to the war in Ukraine, to values close to 2% in recent months, near the institution’s target.
The ECB’s forecast that the indicator will fall to 1.7% by 2026 remains valid, according to observers.
The economic growth outlook is less optimistic.
The figures expected for the eurozone on Thursday should show “almost zero growth in Gross Domestic Product (GDP) for the third quarter,” undermined by “tariff shocks” particularly affecting Ireland, a country heavily exporting to the United States, and “political uncertainty in France, which stifles demand” and delays investment decisions, according to Martinez.
In Germany, the stalled engine of the eurozone, the recovery plan approved by Friedrich Merz’s government “will only impact growth and inflation from 2026,” adds the economist.
The ECB relies, however, on the labor market’s resilience and the robustness of services to sustain activity in the coming months.
Currently, the central bank still forecasts a eurozone growth of 1.2% in 2025, 1.0% in 2026, and 1.3% in 2027.
While patience is key, the crucial question remains the potential for future easing.
“The ECB’s rate-cutting cycle is not necessarily over,” warns Ulrike Kastens, chief economist at DWS.
The monetary status quo could last several more months before a downward movement is anticipated “in March 2026” by Martinez, when inflation is expected to “fall significantly below 2%, driven by the delayed drop in energy prices and the strength of the euro.”
Attention will also turn to Paris.
Amid political balancing, budgetary uncertainty, and debt tensions, the interest rate difference between French and German debt, which serves as a reference, has reached its highest level in several years.
Lagarde “should refrain from commenting on France’s individual case,” believes Martinez, to avoid speculation about market intervention in bonds, despite heated debates in Paris.
But without completely avoiding press questions, the former French economic minister should “express confidence that policymakers will try to reduce uncertainty as much as possible and will meet their budget commitments with Europe,” he concludes.
