ECB leaves rates unchanged amid stable inflation, stronger growth view

The European Central Bank on Thursday left interest rates unchanged amid a brighter forecast economic outlook.

The decision, which was expected, leaves the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility unchanged at 2.00%, 2.15% and 2.40% respectively.

The Frankfurt-based lender last cut rates in June, with holds following at policy meetings in July, September and October.

On Thursday, the ECB said its updated assessment reconfirms that inflation should stabilise at the 2% target in the medium term.

New staff projections show headline inflation averaging 2.1% in 2025, 1.9% in 2026, 1.8% in 2027 and 2.0% in 2028. For inflation excluding energy and food, staff project an average of 2.4% in 2025, 2.2% in 2026, 1.9% in 2027 and 2.0% in 2028.

In September, ECB staff projected headline inflation averaging 2.1% in 2025, 1.7% in 2026 and 1.9% in 2027. For inflation excluding energy and food, they had expected an average of 2.4% in 2025, 1.9% in 2026 and 1.8% in 2027.

The ECB said inflation forecast has been revised up for 2026, mainly because staff now expect services inflation to decline more slowly.

Economic growth is expected to be stronger than in the September projections, driven especially by domestic demand.

Growth has been revised up to 1.4% in 2025 from the 1.2% expected in September, 1.2% in 2026 from 1.0% before, and to 1.4% in 2027 from 1.3%.

Growth is then expected to remain stable at 1.4% in 2028.

Looking ahead, the ECB's Governing Council said it is determined to ensure that inflation stabilises at its 2% target in the medium term.

"It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance," the statement said and "is not pre-committing to a particular rate path".

"In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it," the statement continued.

Data published by Eurostat on Wednesday showed consumer price inflation was lower than previously estimated in November.

The harmonised index of consumer prices rose 2.1% from a year before, unchanged from October's annual pace and below Eurostat's preliminary estimate of 2.2%. On a monthly basis, consumer prices fell 0.3% in November, reversing a 0.2% increase in October.