ECB Holds Interest Rate at 2.15% While Upgrading Eurozone Growth Forecasts

Frankfurt – The European Central Bank (ECB) has maintained interest rates for the fourth consecutive time during its December 2025 meeting, aligning with market expectations, holding the main refinancing rate at 2.15% and the deposit rate at 2.0%.

Policymakers reaffirmed their commitment to a data-driven, meeting-by-meeting approach in evaluating the appropriate monetary policy path, amid a delicate balance between slowing inflation and supporting economic growth.

Improved Economic Growth Outlook

Accompanying the decision to hold rates was the release of updated forecasts from ECB experts, showing a significant improvement in growth prospects compared to September estimates, primarily driven by rising domestic demand within the Eurozone.

According to the new estimates:

• The economy is expected to grow by 1.4% in 2025.

• And 1.2% in 2026.

• And 1.4% in 2027.

• With growth stabilizing at 1.4% in 2028.

Inflation Approaching Target

Regarding prices, the bank predicted that the average headline inflation would reach:

• 2.1% in 2025.

• 1.9% in 2026.

• 1.8% in 2027.

• Before rising again to 2.0% in 2028.

The bank noted that 2026 inflation forecasts were slightly raised, due to expectations of a slower-than-previously-anticipated decline in service sector inflation, reflecting ongoing structural price pressures.

Reading the Decision

The decision to hold rates reflects the ECB's cautious approach to monetary policy management, with a clear tendency to await further data before any potential adjustments, as monetary authorities seek to achieve a soft landing for the economy without undermining recovery or reigniting inflation.