The European Central Bank kept its key interest rate steady at 2%, following the US Federal Reserve’s decision to cut rates by 0.25%. This marks the third pause in the rate-cutting cycle that began in June 2024. Inflation data expected on Oct. 31 should remain close to the ECB’s 2% target.

Eurozone inflation figures are set to be released on Oct. 31, with overall inflation expected to remain stable or slightly lower than in September. Core inflation is anticipated to have risen by 2.3% year over year in October, slightly below the previous month’s reading of 2.4%.

The ECB has maintained its key interest rates since June 11, with the deposit facility rate at 2.00%, main refinancing rate at 2.15%, and marginal lending facility at 2.40%. This decision follows a quarter-point cut in June and unchanged rates in July and September.

Financial markets anticipate the ECB to keep rates steady well into 2026, with little urgency for further action due to stable inflation nearing target levels. Falling rates typically benefit equities, lower yields in bond markets, impact cash savers with lower savings account rates, and make consumer debt and mortgages cheaper for borrowers.

The last ECB meeting for 2025 is scheduled for December 18. The decision to hold rates steady at 2% should be supportive of businesses across Europe looking to borrow and invest, potentially bolstering equity markets in the region.

Read more at Morningstar: ECB Holds Rates as Expected – All Eyes Turn to December