18 December 2025
If you are covering the ECB’s latest interest rate decision, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“The ECB’s decision to maintain its hold on rates comes as a surprise to no one, and 2026 looks likely to be similarly uneventful unless there is a significant shift in the economic outlook.
“Most economists expect rates to remain unchanged throughout next year, particularly after Christine Lagarde reaffirmed her confidence that current monetary policy is well positioned. While a rate cut cannot be entirely ruled out if inflation continues to surprise on the upside, any movement is likely to be minimal for the foreseeable future.
“Economic growth has been relatively steady this year despite the ongoing impact of US tariffs. In a worst-case scenario, a rate hike could come into play if GDP accelerates following Germany’s stimulus spending, but overall growth remains a changing landscape. ECB staff projections now put 2025 GDP at 1.4%, up from 1.2% in September, while 2026 is forecast to be 1.2%, compared with 1.0% previously. The 2027 figure was also increased to 1.4% up from 1.3%.
“Inflation has hovered close to the ECB’s 2% target for much of the year and is expected to ease further in 2026. Staff projections see inflation averaging 2.1% this year, falling to 1.9% next year and to 1.8% in 2027.
“For now, and likely some way into next year, the ECB will be pleased to find itself in a fairly comfortable ‘wait-and-see’ position.”
