In September 2025, the European Central Bank (ECB) kept its deposit rate unchanged at 2% for the second consecutive meeting, effectively signaling the end of its monetary easing cycle. As part of that cycle, rates were cut a total of eight times – from 4% down to the current 2% – with the last reduction decided in July. This time, the ECB provided no forward guidance, emphasizing instead that future decisions will be made “meeting by meeting,” based on incoming economic data.
ECB President Christine Lagarde stated that inflation is now at a “desirable” level, though the economic environment remains “more uncertain than usual” due to instability in global trade. She stressed that the disinflation process has concluded and that minor, temporary deviations from the inflation target do not necessarily require a central bank response. Lagarde also underlined that risks to economic growth are now balanced, whereas in the past negative factors had dominated.
Updated ECB forecasts point to inflation of 1.7% in 2026 and 1.9% in 2027 – slightly below previous expectations. For growth, euro area GDP is projected to expand by 1.2% in 2025 and 1.0% in 2026.
On financial markets, the ECB’s decision was interpreted as a clear signal that the rate-cutting cycle has ended. The yield on German 10-year government bonds rose to 2.69%, while the EUR/USD pair strengthened to 1.173, partly driven by dollar weakness. Investors no longer expect further cuts in the near term.
Despite concerns over U.S. tariffs on most EU goods (set at 15%), geopolitical tensions, and political uncertainty in France following Sébastien Lecornu’s appointment as prime minister, the euro area economy has shown resilience, with industrial output rebounding. Within the ECB itself, however, divisions remain. Some policymakers, such as Gediminas Šimkus, warn against the risk of persistently low inflation, while others, including Isabel Schnabel, highlight the potential for renewed price pressures stemming from trade frictions and rising defense spending.
Author: Krzysztof Kamiński – OANDA TMS
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Source: CEO.com.pl
