The European Central Bank kept interest rates unchanged at 2% in a well-telegraphed decision on Thursday, offering no clues about its next move, even as investors keep betting that one final cut may be on the agenda in the months ahead.
The euro held lower after the decision, down around 0.3% on the day at $1.159, while euro zone government bond yields were also little changed from where they stood before the decision and Europe’s broad STOXX 600 index remained around 0.6% lower.
COMMENTS:
SIMON DANGOOR, HEAD OF FIXED INCOME MACRO STRATEGIES, GOLDMAN SACHS ASSET MANAGEMENT, LONDON:
“We do think the possibility of a cut in December, or the first half of 2026 is under-priced, although our base case remains for the ECB to hold for the foreseeable future. Data readings remain mixed, while the possible slow rollout of Germany’s fiscal expansion could reduce growth prospects and tame some of the hawks on the committee. December’s meeting brings with it 2028 economic projections; if they show inflation undershooting three years in a row, the doves will be pressing the case for a cut sooner rather than later.”
MATTHIEU SAVARY, CHIEF STRATEGIST, DEVELOPED MARKETS EX US, BCA RESEARCH, MONTREAL:
“The ECB’s steady hand signals confidence that inflation and growth are on a sustainable path. As a result, European policy will not cause major surprises and will evolve in line with market pricing. This leaves the euro, European stocks, and bonds at the mercy of the evolution of U.S. policy and markets.”
MARK WALL, CHIEF EUROPEAN ECONOMIST, DEUTSCHE BANK, LONDON:
“Where’s the smoking gun for a rate cut? Despite the U.S. tariffs, despite all the various sources of uncertainty, the European economy continues to eke out some growth. Economic ‘resilience’ is keeping the ECB doves in check, and the policy pause on the rails.”
MARCHEL ALEXANDROVICH, EUROPEAN ECONOMIST, SALTMARSH ECONOMICS, LONDON:
“No surprises from the ECB, with interest (rates) left unchanged and no real shift in language from the meeting six weeks ago. Similarly, in the press conference, Christine Lagarde is likely to reiterate that policy ‘remains in a good place’.”
IRENE LAURO, EURO ZONE ECONOMIST, SCHRODERS:
“We remain confident that growth will strengthen into next year, supporting the ECB’s decision to keep interest rates on hold into 2026. However, if inflation comes in lower beyond current projections, the ECB could follow the Fed’s risk-management approach and deliver a precautionary rate cut. For now, the outlook for the eurozone has shifted positively—a welcome change after months of stagnation.”
ARNE PETIMEZAS, DIRECTOR RESEARCH, AFS GROUP, AMSTERDAM:
“ECB rates unchanged as expected, and again, no forward guidance, but a repeat of the wait-and-see approach. Positive undertones in the Governing Council statement, cheerleading the resilience of the economy. A sign where the press conference is going, where we should expect a more upbeat President Lagarde.”
(Reporting by the Reuters Markets Team; Compiled Dhara Ranasinghe; Editing by Amanda Cooper)
