The European Central Bank announced on 18 December 2025 that it would maintain its three key interest rates. This decision, widely anticipated by financial markets, confirms the Frankfurt-based institution’s commitment to anchoring inflation sustainably around its 2% target, without undermining the ongoing economic recovery.
For several months, macroeconomic indicators have pointed to a gradual easing of inflationary pressures across the euro area. The latest projections published by the Eurosystem support this trend: inflation is expected to average 2.1% in 2025, before falling below 2% in 2026 and 2027, and returning exactly to target in 2028. This trajectory is considered consistent with price stability, the cornerstone of the ECB’s mandate.
However, while overall price dynamics appear to be normalising, core inflation remains more persistent. In particular, the services sector continues to exert upward pressure on prices, which explains the upward revision of forecasts for 2026. This situation calls for caution and justifies the continuation of a still restrictive monetary policy.
On the growth front, the outlook is slightly more encouraging. The euro area economy is expected to benefit from a rebound in domestic demand, driven by both consumption and investment. Growth forecasts have therefore been revised upward, reaching 1.4% in 2025, followed by a slight slowdown in 2026, and then stabilising around 1.4% through 2028. This moderate pace should nevertheless be sufficient to avoid a scenario of prolonged stagnation.
Against this backdrop, the ECB has decided to keep its policy rates at their current levels. The deposit facility rate remains at 2.00%, the main refinancing operations rate at 2.15%, and the marginal lending facility rate at 2.40%. This status quo reflects a clear objective: maintaining a balance between fighting inflation and supporting economic activity.
At the same time, the institution continues the gradual reduction of its balance sheet. Portfolios linked to the asset purchase programmes, APP and PEPP, are shrinking in a predictable manner, as maturing securities are no longer reinvested. This represents a further step in the normalisation of monetary policy following the exceptional measures adopted during recent crises.
Staying true to its approach, the Governing Council reiterates that there is no pre-defined path for interest rates. Decisions will continue to be taken meeting by meeting, based on available economic and financial data. The ECB also stands ready to deploy all its instruments should unjustified tensions threaten the smooth transmission of monetary policy across the euro area.
By keeping its rates unchanged, the ECB sends a message of stability combined with vigilance. In an environment still marked by economic and geopolitical uncertainty, the institution intends to proceed cautiously, while remaining prepared to adjust its course if conditions require it.
