The European Central Bank is widely expected to keep interest rates unchanged for a third consecutive meeting on Thursday, signalling a steady-as-she-goes approach as price pressures stabilise and the euro-area economy shows resilience.
After a year of rate cuts, the ECB has held its benchmark deposit rate at 2% since July. Inflation has hovered close to the bank’s 2% target, while Europe has absorbed the economic impact of US President Donald Trump’s trade measures more smoothly than once feared.
Spanish central bank governor Jose Luis Escriva, who sits on the ECB’s Governing Council, said in a recent interview that current borrowing costs remain “appropriate,” suggesting policymakers see little urgency to ease policy further.
The rate decision will be released from Florence, Italy, where ECB officials are holding a meeting away from their headquarters in Frankfurt. With markets anticipating no change, attention will shift to ECB President Christine Lagarde’s press briefing for any signals on future moves.
Fed Cuts Contrast with ECB Caution
The ECB’s stance stands in contrast to the US Federal Reserve, which has resumed trimming rates amid signs of cooling employment momentum in the United States. The Fed delivered its second consecutive quarter-point cut on Wednesday.
Still, eurozone policymakers appear reluctant to follow Washington’s lead. The ECB upgraded its growth outlook in September, strengthening the view that the bloc has regained some footing after years of sluggish performance.
Risks and Policy Divide
Despite improved economic sentiment, risks persist. Political uncertainty in France has increased financing costs there, and renewed global trade tensions could weigh on European activity. These issues have fuelled internal debate on whether the ECB should prepare additional cuts later.
Analysts at UniCredit noted policymakers appear split over the risks to inflation and the possibility of an “insurance cut” in coming months.
Lithuanian council member Gediminas Simkus has openly pushed for easing at the ECB’s December meeting, arguing that weaker wage growth and a firmer euro could undermine inflation.
Economists see the possibility of further action next year. Andrew Kenningham of Capital Economics expects rate reductions in 2026, citing a soft labour market and a lack of inflation resurgence.
“With the economy still fragile and wage pressures easing, inflation risks are clearly on the downside,” he said.
