ECB Keeps Rates Unchanged as Inflation Nears 2% Target
The European Central Bank kept interest rates unchanged on Thursday, opting for caution as inflation continues to hover around its 2% target and updated forecasts point to a modestly improved growth outlook.
The deposit facility rate stays at 2.00%, the main refinancing operations rate at 2.15%, and the marginal lending facility at 2.40%. The Governing Council stressed it is not committing to a fixed path for rates, reaffirming that decisions will remain data-dependent and assessed on a meeting-by-meeting basis.
Inflation Projections Largely Steady
Fresh ECB staff forecasts show headline inflation averaging 2.1% in 2025, before easing to 1.7% in 2026 and 1.9% in 2027 — broadly unchanged from June. Excluding energy and food, inflation is projected at 2.4% in 2025, 1.9% in 2026, and 1.8% in 2027, suggesting underlying pressures are still fading gradually.
The Governing Council reiterated its commitment to ensuring inflation stabilises at 2% over the medium term, noting that monetary policy decisions will hinge on incoming economic data, the dynamics of underlying inflation, and the transmission of earlier tightening measures.
Growth Revised Up for 2025
On growth, staff projections now see euro area GDP expanding 1.2% in 2025, up from 0.9% in June. The outlook for 2026 has been trimmed slightly to 1.0%, while 2027 is unchanged at 1.3%. The Bank said the eurozone economy is stabilising but remains vulnerable to risks from global trade tensions and financial conditions.
Asset Purchases Wind Down
The ECB also confirmed that its balance sheet is shrinking in a “measured and predictable” fashion, with no reinvestments from maturing securities in the APP and PEPP portfolios. Officials underscored that tools such as the Transmission Protection Instrument remain available should market stress threaten the smooth pass-through of monetary policy across the bloc.
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