Finance
Instant View: ECB holds rates steady at 2%, lowers inflation forecasts
Published by Global Banking and Finance Review
Posted on September 11, 2025
3 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on September 11, 2025
3 min readLast updated: January 21, 2026
The ECB held interest rates at 2% and adjusted its inflation forecasts, with inflation now expected at 1.9% in 2027. Economic risks have shifted from trade to political instability.
LONDON (Reuters) - The European Central Bank left interest rates unchanged on Thursday as expected but offered no clues about its next move, even as investors continue to bet that more support will be needed as inflation dips below target next year.
Inflation is now seen at 1.9% in 2027, below the 2.0% projected in June, and core inflation is seen at 1.8% then, both below the 2% target, fresh ECB projections showed.
The euro briefly slipped but was last trading 0.1% firmer at $1.1708 , while interest rate-sensitive short-dated bond yields were broadly steady on the day. Europe's STOXX index was up 0.3% on the day.
ARNE PETIMEZAS, DIRECTOR RESEARCH, AFS GROUP, AMSTERDAM:
"A bit of weakness in euro/dollar as the ECB cut the 2027 core CPI forecast to 1.8% from 1.9%. Yes, that's 2027, and nobody has a clue, and the ECB staff forecasting track record is awful. What matters is that the doves now have a shoe to throw at the hawks."
JACK ALLEN-REYNOLDS, DEPUTY CHIEF EURO-ZONE ECONOMIST,
CAPITAL ECONOMICS, LONDON:
"The ECB’s decision to leave its deposit rate unchanged at 2.0% today and offer no guidance on future rate decisions was in line with expectations. The bank is unlikely to change interest rates again this year, but we think the risks are skewed towards renewed cuts in 2026."
IRENE LAURO, EURO ZONE ECONOMIST, SCHRODERS, LONDON:
"The ECB today appears to confirm our view that the easing cycle has ended. With trade uncertainty fading, the euro area’s recovery is set to accelerate."
"Risks have shifted for the eurozone from trade uncertainty to political instability, with France now in the fiscal spotlight. But the resilience of the economy and strengthening domestic demand means the ECB can afford to keep monetary policy unchanged."
FRANCESCO PESOLE, FX STRATEGIST, ING, LONDON:
"The euro is a little weaker, it's what we expected, the risks were to the downside.
"It could be this GDP forecast for 2026 is a little lower.
"There’s no reason why at this point they would change their guidance. It's a small reaction so we'll see what happens in the press conference."
"Things that can move a little bit more is probably anything related to bunds and if the market senses that the council or (ECB President Christine) Lagarde are ready to take the French situation into consideration in monetary policy decisions.
"But I think it’s still not highly likely that she will give anything away, she will just follow the script where she says the ECB can step in with the necessary tools."
MARCHEL ALEXANDROVICH, ECONOMIST, SALTMARSH ECONOMICS, LONDON:
"No surprises from the ECB as it leaves interest rates unchanged. However, in terms of the new forecasts, there are downward revisions to the inflation forecasts for 2026 and 2027, which suggests that the ECB maintains a slight easing bias as it heads into year-end."
SYLVAIN BROYER, CHIEF EMEA ECONOMIST, S&P GLOBAL RATINGS:
"The ECB is done cutting rates. Sticky services and food inflation keep consumer sentiment under strain. Real wage growth still outpaces productivity, and easing the policy rates to weaken the euro would be useless in the present situation."
(Reporting by the Reuters markets team; Compiled by Dhara Ranasinghe; Editing by Amanda Cooper)
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation and ensuring economic stability.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to keep the economy running smoothly.
The European Central Bank (ECB) is the central bank for the eurozone, responsible for monetary policy, maintaining price stability, and overseeing the financial system within the European Union.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by monetary policy and economic conditions.
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