FRANKFURT – The European Central Bank is widely expected to keep interest rates at current levels on Thursday, a stance that could be extended for months and even years, according to those following the public lender.
An economists’ poll predicted the bank will leave its main interest rates unchanged, which would keep the deposit rate at 2.00% and the main refinancing rate at 2.15%. The bank’s 25-basis point reduction in early Junerepresented its seventh straight rate cut, a downward move that was likely its last in this cycle, a growing number of analysts have predicted.
Inflation, the ECB’s key trigger for policy changes, ticked up a tenth in August to 2.1%, leaving it just above the bank’s medium-term target of 2.0%. The core rate held at 2.3% last month, also not enough for rate action, according to analysts. In short, the pressure to cut due to consumer price growth has all but evaporated.
Economic growth, a tier-two concern at the bank, has shown some signs of shoring up following the trade agreement between the EU and the US. Eurozone manufacturing PMI jumped nearly a point to 50.7 last month, hitting a 38-month high and pushing back into expansion territory above the 50 mark. But services slid half a point to 50.5, with the composite reading for the economy ticking a tenth higher to 51.0, leaving the indicator just within growth territory.
Despite a trade deal with the US that sparked myriad complaints from Europeans, German business confidence improved again in August, according to the country’s Ifo economics institute. In fact, its headline index hasn’t lost ground all year.
The Eurozone economy also has support coming: Brussels and Berlin are prepping massive military spending packages, with the latter set to invest billions into domestic infrastructure, moves likely to boost growth.
In light of recent data, officials at the ECB have little reason to fiddle with current monetary policy, Deutsche Bank wrote. “There has been nothing in the incoming data to challenge the assumption of a further pause in September.”
The sweet spot
The note from Deutsche predicted that what ECB President Lagarde says in Thursday’s press conference will set the stage for the months ahead: “We expect her to repeat that policy is ‘in a good place’ to navigate uncertainties. This is the rhetorical device to signal a ‘flexible pause’: a pause without contradicting the data-dependent, meeting-by-meeting approach. Lagarde’s hawkishness in July might have overstated the consensus view of the governing council and we expect a message that the council’s underlying policy stance is unchanged, and a pause has unanimous support.”
Deutsche Bank noted that while risks are skewed toward more cuts over the next six to nine months, “At 2%, we think the ECB has reached the terminal deposit rate in this cycle. Over the next year, we expect the risks to rotate and the ECB to hike at the end of 2026.”
Denmark’s Danske Bank predicted no rate action until 2027: “We believe hikes in 2026 are premature due to inflation likely being below target by then and the German economy having sufficiently room to increase production without fuelling inflation. Yet, we do acknowledge upside risks to the ECB profile at the end of 2026, but expect the policy rate to remain at 2.0% in 2025 and 2026 in our baseline.”
Then again, the news never stops, making many long-term predictions questionable. Just looking at a few recent headlines—ongoing political difficulties in France, Israeli attacks on US ally Qatar, Russian drones in Polish airspace—underlines the current level of turmoil, some or much of which could impact the European and global economy. So, while bank analysts are predicting steady monetary policy from the ECB in the months and years ahead, the geopolitical situation could dash such forecasts on a moment’s notice.
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- Many analysts say cut cycle is over
- Growth risks could spur another reduction
- Staff scheduled to update forecasts
- ECB decision due Thursday at 12:15 GMT / 14:15 CET
- Press conference set for 12:45 GMT / 14:45 CET
By Eric Culp
European Editor, LiveSquawk News
@eculp.bsky.social
@EricCulpLS
10 September 2025 | 10:50 GMT
FRANKFURT – The European Central Bank is widely expected to keep interest rates at current levels on Thursday, a stance that could be extended for months and even years, according to those following the public lender.
An economists’ poll predicted the bank will leave its main interest rates unchanged, which would keep the deposit rate at 2.00% and the main refinancing rate at 2.15%. The bank’s 25-basis point reduction in early June represented its seventh straight rate cut, a downward move that was likely its last in this cycle, a growing number of analysts have predicted.
Inflation, the ECB’s key trigger for policy changes, ticked up a tenth in August to 2.1%, leaving it just above the bank’s medium-term target of 2.0%. The core rate held at 2.3% last month, also not enough for rate action, according to analysts. In short, the pressure to cut due to consumer price growth has all but evaporated.
Economic growth, a tier-two concern at the bank, has shown some signs of shoring up following the trade agreement between the EU and the US. Eurozone manufacturing PMI jumped nearly a point to 50.7 last month, hitting a 38-month high and pushing back into expansion territory above the 50 mark. But services slid half a point to 50.5, with the composite reading for the economy ticking a tenth higher to 51.0, leaving the indicator just within growth territory.
Despite a trade deal with the US that sparked myriad complaints from Europeans, German business confidence improved again in August, according to the country’s Ifo economics institute. In fact, its headline index hasn’t lost ground all year.
The Eurozone economy also has support coming: Brussels and Berlin are prepping massive military spending packages, with the latter set to invest billions into domestic infrastructure, moves likely to boost growth.
In light of recent data, officials at the ECB have little reason to fiddle with current monetary policy, Deutsche Bank wrote. “There has been nothing in the incoming data to challenge the assumption of a further pause in September.”
The sweet spot
The note from Deutsche predicted that what ECB President Lagarde says in Thursday’s press conference will set the stage for the months ahead: “We expect her to repeat that policy is ‘in a good place’ to navigate uncertainties. This is the rhetorical device to signal a ‘flexible pause’: a pause without contradicting the data-dependent, meeting-by-meeting approach. Lagarde’s hawkishness in July might have overstated the consensus view of the governing council and we expect a message that the council’s underlying policy stance is unchanged, and a pause has unanimous support.”
Deutsche Bank noted that while risks are skewed toward more cuts over the next six to nine months, “At 2%, we think the ECB has reached the terminal deposit rate in this cycle. Over the next year, we expect the risks to rotate and the ECB to hike at the end of 2026.”
Denmark’s Danske Bank predicted no rate action until 2027: “We believe hikes in 2026 are premature due to inflation likely being below target by then and the German economy having sufficiently room to increase production without fuelling inflation. Yet, we do acknowledge upside risks to the ECB profile at the end of 2026, but expect the policy rate to remain at 2.0% in 2025 and 2026 in our baseline.”
Then again, the news never stops, making many long-term predictions questionable. Just looking at a few recent headlines—ongoing political difficulties in France, Israeli attacks on US ally Qatar, Russian drones in Polish airspace—underlines the current level of turmoil, some or much of which could impact the European and global economy. So, while bank analysts are predicting steady monetary policy from the ECB in the months and years ahead, the geopolitical situation could dash such forecasts on a moment’s notice.
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