Europe | The ECB adopts a wait‑and‑see stance

Summary

The ECB followed the expected script on Thursday and kept the deposit facility interest rate unchanged at 2%. The decision, adopted unanimously, reinforces that the institution has entered a prolonged phase of interest rate stability, in which monetary policy loses some prominence.

Key points

• Key points:
• The president insisted that the ECB is "in a good place", an expression already used at the last meeting to underline that, in principle, rates will not change. However, she was quick to clarify that being "in a good place" does not mean being immobile.
• Lagarde was especially clear in rejecting the possibility of offering forward guidance, which in the past was the mantra of central bank policy to manage expectations and strengthen their credibility.
• In addition, the ECB revised its growth forecasts upwards. Digitalization and expense linked to artificial intelligence are beginning to appear as new drivers of growth, although the president pointed out that it is still too early to conclude that the eurozone is facing a structural change.
• On inflation, the message was one of continuity, but with nuances, given the small, but persistent, surprises that we are seeing recently in services inflation and wage indicators.
• In short, it seems that in the absence of relevant shocks, deposit rates could remain at 2% throughout 2026 and much of 2027. But the tense wait for what else can come from the other side of the Atlantic will continue.

Geographies

Topics

Tags