The European Central Bank decided today, 18 December, to keep the three reference interest rates unchanged: 2 percent on deposits, 2.15 percent on main refinancing and 2.40 percent on marginal loans. It is the fourth consecutive time that the Frankfurt-based banking institution has decided not to change rates since last June, after having reduced them by two percentage points with eight cuts in a year.
The ECB raises its Eurozone GDP estimates: +1.4% in 2025
The European Central Bank adopted a more optimistic assessment of the Eurozone economy, which has shown good resilience in the face of global trade shocks. In light of this resilience, the Frankfurt institute has revised its growth estimates for the euro area upwards and reiterated that inflation should stabilize at the target of 2 percent in the medium term. A reading which, in fact, seems to reduce the space for further rate cuts in the short term.
Economic growth is expected to be stronger than the September projections, driven in particular by domestic demand. Following an upward revision, it would stand at 1.4 percent in 2025, 1.2 percent in 2026 and 1.4 percent in 2027, a level at which it should remain in 2028. “Economic growth – we read in the press release from the ECB Governing Council – should be more sustained than the September projections, driven in particular by domestic demand”.
Inflation is stable at 2 percent in the medium term
The Eurosystem’s latest projections “indicate overall inflation of 2.1 percent on average in 2025, 1.9 percent in 2026, 1.8 percent in 2027 and 2.0 percent in 2028”, explains the ECB. Inflation net of the energy and food component would average 2.4 percent in 2025, 2.2 percent in 2026, 1.9 percent in 2027 and 2.0 percent in 2028. The indicators point to “inflation consistent with the target” of 2 percent, ECB President Christine Lagarde said in a press conference at the end of the Governing Council.
Inflation has been revised upwards for 2026, mainly because experts now expect services inflation to fall more slowly. Lagarde is convinced that “inflation should decline in the short term and will remain below the 2 percent target in 2026 and 2027 due above all to the base effect of energy prices and will then return to the target in 2028 also with the launch of the emissions trading system. In any case, the level is close to the 2 percent objective, i.e. what the ECB considers adequate by statute for an economy in good condition.
