The European Central Bank (ECB) left interest rates unchanged for a fourth straight meeting, amid ongoing global economic uncertainty.
The ECB’s governing council kept its main interest rate at 2 per cent once more, the bank said in a statement. That was in line with economists’ expectations.
Notably the ECB improved its economic forecasts, driven by domestic demand. Growth for the euro zone as a whole has been revised up to 1.4 per cent in 2025, 1.2 per cent in 2026 and 1.4 per cent in 2027 and is expected to remain at 1.4 per cent in 2028, it said in a statement.
As recently as last June, the ECB expected growth this year to come in at just 0.9 per cent. In September, the bank raised its forecast for 2025 to 1.2 per cent in what was the first upward revision to growth projections since March 2024.
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At that time, it trimmed next year’s projection from 1.1 per cent to 1 per cent on the back of falling global demand linked to greater trade protection. However, it clearly is now more sanguine about those risks.
The forecasts are seen as an indicator of what the ECB’s next move on interest rates will be.
Senior policymaker Isabel Schnabel surprised markets last week when she said euro zone growth risks were now tilted to the upside and that she was comfortable with market bets pointing to the next move in interest rates being a hike rather than a cut.
Her comments reflect the rapidly shifting outlook for interest rates. Only a few months ago markets were expecting more ECB rate cuts, but the rapid reduction in inflation combined with a more positive economic outlook has halted Frankfurt’s rate-cutting cycle.
This is a developing story ...
