ECB holds rates in October

Bank stands pat as expected: At its meeting on 29–30 October, the European Central Bank (ECB) decided to keep its deposit rate at 2.00% for the third meeting in a row. It also held its refinancing and lending rates at 2.15% and 2.40%, respectively. The decision aligned with market expectations.

ECB holds fire as inflation steadies and GDP growth holds up: The ECB’s latest move was driven by stable inflation and sturdier-than-expected economic growth. On the price front, inflation has hovered around the 2.0% target in recent months, with core readings remaining consistent with the target. The Central Bank flagged that while firms’ profits are recovering, labor costs should cool further on the back of rising productivity and decelerating wage growth. On economic growth, the ECB noted that the euro area’s economy remained resilient and expanded more than expected in Q3. Moreover, risks to the outlook have somewhat faded in recent months, thanks in part to the summer’s EU-U.S. trade deal, the ceasefire in the Middle East, and progress in U.S.-China talks.

ECB to stand pat ahead: At her post-meeting press conference, President Lagarde said ECB rates are in “a good place,” while stressing that future moves will hinge on new incoming data. Still, many analysts read between the lines, sensing her tone as a signal that the Central Bank is content to hold rates through the end of 2025 and likely into 2026. That said, the 2026 outlook is less clear-cut, with our Consensus somewhat mixed. Some panelists see scope for a token trim or two, others for a modest tightening, but most agree the ECB’s compass still points to steady rates. In other words, policymakers appear in no hurry to move away from their “good place”. The Bank is set to reconvene on 17–18 December.

Panelist insight: Commenting on the outlook, Jan von Gerich, analyst at Nordea, stated: “We do not expect rate changes from the ECB for a long time, though there are still many risks to this view. Also today’s message further illustrated that the ECB is nowhere near any rate changes. We expect the economic recovery to gradually gather speed, shifting the inflation risk picture to the upside and starting to support rate hikes in 2027.”

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