ECB leaves interest rates at 2 per cent, more optimistic on growth
The European Central Bank has left interest rates unchanged for the fourth consecutive meeting. The bank announced the widely expected decision on Thursday following its summit in Frankfurt.
The deposit rate, the ECB’s key interest rate, remains at 2 per cent. This rate determines the interest banks receive when they park money with the ECB. Since July, the bank has paused any rate cuts, after a period of systematic reductions.
Officials said the decision reflects continued expectations that inflation will stabilise around the 2 per cent target over the medium term. The ECB forecasts inflation at 2.1 per cent this year, followed by 1.9 per cent in 2026, 1.8 per cent in 2027 and 2 per cent in 2028.
The central bank noted that the key reason for a higher inflation forecast next year is that elevated price increases in services are expected to come down more slowly. Still, ECB president Christine Lagarde cautioned that the inflation outlook is "more uncertain than usual" due to the "volatile international environment."
Optimistic outlook
Lagarde also said the economy has been resilient, pointing to stronger consumption, investment and exports in the third quarter despite US president Donald Trump’s tariffs. She added that domestic demand is likely to be the "main engine of growth in the years ahead."
The ECB has become more optimistic about economic growth compared with its September projections, thanks to stronger domestic demand. Growth is now expected at 1.4 per cent this year, 1.2 per cent in 2026, 1.4 per cent in 2027, and 1.4 per cent again in 2028.
PHOTO © Kirill KUDRYAVTSEV / AFP
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