ECB Keeps Interest Rates on Hold as Inflation Slows and Growth Outlook Shifts
The European Central Bank (ECB) has decided to keep interest rates unchanged, as inflation in the eurozone continues to move closer to the bank’s target. The decision was widely expected, but it also shows the cautious approach the ECB is taking at a time of mixed signals on growth and politics.
New projections from the ECB suggest headline inflation will average 2.1% in 2025, before easing to 1.7% in 2026 and rising slightly to 1.9% in 2027. Core inflation, which excludes food and energy prices, is expected to remain higher at 2.4% in 2025 before falling to 1.9% in 2026 and 1.8% in 2027. These forecasts signal that while inflation is coming under control, risks still remain.
On the economic growth side, the outlook is uneven. The ECB now sees stronger growth for 2025, raising its forecast to 1.2% from 0.9%. But growth is expected to slow in 2026 to around 1.0% before picking up again to 1.3% in 2027. This reflects the uncertainty facing the eurozone economy as it deals with debt levels, global trade tensions, and political challenges.
ECB President Christine Lagarde repeated that future decisions will be based on a data-dependent approach, meaning the bank will react to new inflation and growth figures rather than following a fixed path.
Impact :
Markets might assume interest rates will stay on hold until mid-2026. However, a sharp fall in inflation or weaker growth could possibly push the ECB toward new policy support.
