ECB holds rates as brighter growth outlook points to prolonged pause
2051 Min Read
The European Central Bank kept its key interest rate unchanged at 2 percent on Thursday, as updated staff projections pointed to a more positive outlook for the eurozone economy following a volatile year.
The ECB revised its growth forecast for this year to 1.4 percent, up from 1.2 percent three months ago, reflecting stronger domestic demand and the fact that a damaging trade conflict with the United States has not materialised. Growth is now expected to reach 1.2 percent in 2026 and 1.4 percent in 2027, both slightly higher than previously forecast. The ECB also published its first projections for 2028, putting growth at 1.4 percent.
The improved outlook reinforces expectations that the ECB is entering a prolonged period of policy stability. Having left interest rates unchanged for a fourth consecutive meeting, most economists now anticipate borrowing costs to remain steady throughout 2026, unless the economy faces a major shock.
“Economic growth is expected to be stronger than in the September projections, driven especially by domestic demand,” the ECB said, while stressing it remains ready to react to significant changes in the economic data.
The ECB has grown more confident as trade tensions with the US eased and geopolitical risks in the Middle East subsided, supporting stronger-than-expected growth of 0.3 percent in the third quarter. Inflation is forecast at 1.9 percent in 2026 and 1.8 percent in 2027, returning to the 2 percent target in 2028.
