The European Central Bank (ECB) has decided to keep interest rates unchanged for the fifth consecutive meeting, following significant cuts in previous months. The ECB’s current stance reflects a data-dependent approach, with inflation easing and growth remaining resilient despite global uncertainties. The outlook suggests rates will remain on hold over the medium-term, with a bias towards potential cuts if economic conditions deteriorate, notes Lee Sue Ann from UOB Group.
ECB keeps rates steady amid economic resilience
“The European Central Bank (ECB) kept rates unchanged for a fifth consecutive meeting, following 200 bps of cuts since Jun 2024, maintaining a data-dependent, meeting-by-meeting approach and judging policy and inflation dynamics to be ‘in a good place’.”
“We had previously expected a 25 bps rate cut this quarter, but now judge that the bar for further easing has risen, leading us to revise our view towards policy rates remaining on hold over the medium-term horizon.”
“That said, if conditions change, the bias would still tilt towards a cut rather than a hike, reflecting downside risks to growth and the disinflationary influence of euro strength.”
“Lagarde noted that a stronger euro could contribute to inflation undershooting the 2% target, but framed this in a largely analytical manner, stressing that recent currency moves remain broadly consistent with the ECB’s baseline assumptions and are not, for now, a source of concern.”
“While the bias would still tilt towards a cut rather than a hike if conditions change — given downside growth risks, euro strength, and disinflationary forces — only a sustained undershoot of the 2% inflation target would meaningfully reopen the case for renewed easing.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/eur-ecb-maintains-rates-as-growth-holds-uob-202602060910
