The ECB kept its key interest rate at 2%, with inflation revised up for 2026 to 1.9%. The governing council will continue to assess monetary policy on a meeting-by-meeting basis. This marks the fourth consecutive pause in rate cuts since June 2024. European stock markets are rising post-decision.

Inflation projections for 2025-2028 have been adjusted, with core inflation expected to average 2.4% in 2025. Economic growth forecasts for the eurozone have also been revised up. ECB staff see the current calm in monetary policy providing flexibility to react quickly to new data.

Economists anticipate the ECB will maintain interest rates at 2% throughout 2026, with a neutral stance. Falling energy prices and low inflation forecast suggest a more easing-oriented stance. Market experts predict minimal likelihood of a rate hike in 2026, with potential for additional easing if inflation dips below 2%.

Read more at Morningstar: European Central Bank Holds Interest Rates in Last Meeting of 2025