The European Central Bank held interest rates for the second meeting in a row on Thursday, as it repeated its pledge to follow a “meeting-by-meeting” approach to policy amid persistent geopolitical uncertainty.
The decision, which was widely expected by analysts and investors, means that the ECB’s main policy rate remains at 2% – half the record high of 4% reached in 2023 and held for much of 2024.
In a statement, the bank’s rate-setting Governing Council said it remains “determined to ensure that inflation stabilises at its 2% target in the medium term”. It added that it “will follow a data-dependent and meeting-by-meeting approach” to policymaking.
Inflation has hovered around the ECB’s 2% for much of the past year, while core inflation – which strips out volatile energy and food costs – has remained stable at 2.3% since May.
The euro fell around 0.3% against the US dollar to $1.167 following the announcement.
ECB President Christine Lagarde said at the bank’s last meeting in July that the ECB was “in a good place” to watch how risks – including US President Donald Trump’s tariff policy – “develop over the course of the next few months”.
Lagarde echoed these remarks to reporters on Thursday, pointing to inflation being close to target, a “solid” labour market, and “more balanced” risks.
“When I say that we are and continue to be a good place, am I saying that we are on a pre-determined path? No,” Lagarde said, adding that the bank will “take stock meeting-by-meeting” in order to “stay in a good place”.
The ECB also upwardly revised its growth expectations for the eurozone this year from 0.9% to 1.2%, but lowered its 2026 projection by 0.1 percentage point to 1%. It also raised its inflation outlook by 0.1 percentage point for 2025 and 2026, to 2.1% and 1.7% respectively.
(aw)
