The ECB is expected to keep interest rates steady on Dec. 18, marking the fourth meeting without a cut since June. Money markets now anticipate a rate increase in October 2026, a significant shift from just a week ago. Inflation in the eurozone might exceed expectations, with strong GDP growth and resilient sentiment indicators.

The ECB’s deposit facility rate is currently at 2.00%, with the main refinancing rate at 2.15% and the marginal lending facility at 2.40%. There have been a total of eight rate cuts since June 2024, leading to the current rates.

ECB executive board member Isabel Schnabel stated that risks to eurozone growth and inflation are tilted to the upside. Strong services inflation and wage growth, along with other factors, may justify a rate hike. Speculation has grown that the next move could be a rate hike, with some economists expecting higher rates due to increased inflation expectations.

ECB staff will present new forecasts on eurozone inflation and growth at the upcoming meeting on Dec. 18. Projections for 2028 will be included for the first time. The delayed implementation of the EU emissions trading system for buildings and road transport may impact inflation forecasts for 2027 and 2028. GDP growth expectations in the region are improving, providing a positive outlook for European equities in the coming year.

Read more at Morningstar: Will the ECB Cut Interest Rates in December?