ECB Holds Rates Steady at 2%

The European Central Bank (ECB) kept its benchmark interest rate unchanged at 2% on Thursday, a widely anticipated decision that offered little guidance on what might come next. 

While policymakers refrained from signaling any imminent shift, investors continue to bet on the possibility of a final rate cut in the coming months.

Following the announcement, the euro slipped 0.4% to trade around $1.156, while eurozone bond yields were largely steady. The STOXX 600 index remained down about 0.5%, reflecting cautious sentiment across European markets.

“The key question is: where’s the compelling evidence for a rate cut?” asked Mark Wall, Chief European Economist at Deutsche Bank in London. “Despite U.S. tariffs and ongoing uncertainty, the European economy is still showing some growth. This resilience is keeping the ECB’s dovish voices in check and maintaining the current pause in policy.”

Marchel Alexandrovich, European Economist at Saltmarsh Economics, echoed that view. “There were no surprises from the ECB,” he said. “Rates were left unchanged, and the language in the statement is virtually identical to that of six weeks ago. President Lagarde is likely to stress in the press conference that policy remains appropriately positioned.”

According to Irene Lauro, Senior Eurozone Economist at Schroders, the outlook supports a prolonged pause. “We remain confident that growth will strengthen next year, validating the ECB’s decision to keep rates unchanged through 2026,” she noted. 

“However, if inflation undershoots expectations, the ECB could follow the Fed’s cautious playbook and deliver a pre-emptive cut. For now, the eurozone outlook appears more positive, a welcome shift after months of stagnation.”

Arne Petimezas, Head of Research at AFS Group in Amsterdam, said the ECB’s decision was fully priced in. “Once again, there’s no forward guidance, just the same wait-and-see approach,” he said. “The tone of the Governing Council’s statement highlights economic resilience, suggesting Lagarde will strike an upbeat tone in her press conference.”

As inflation continues to ease and growth shows tentative signs of recovery, the ECB finds itself at a delicate crossroads: maintaining its credibility on price stability while avoiding premature easing that could reignite inflationary pressures.