The European Central Bank is widely expected to keep interest rates unchanged through at least the end of 2026, according to a Reuters poll released on Thursday, marking the longest rate-pause period since euro-zone rates were below zero.

Economists said inflation in the euro area has continued to cool, and growth remains modest, prompting policymakers to maintain a cautious stance.

The deposit rate is projected to hold at 2.00%, and inflation is forecast to stay near the bank’s 2% target in the coming years. ECB officials expressed concerns about disinflation risks, even as resilience in domestic activity supports calm on the growth front.

Markets priced in limited near-term rate changes, reflecting confidence in the ECB’s steady approach.

The poll also indicated that euro-zone GDP growth is expected to moderate in 2026 and 2027, with inflation gradually aligning with targets.

While external pressures from geopolitical tensions and global trade dynamics persist, internal performance has provided some stability.

Analysts said that the extended pause could help support investment and borrowing activity in the region.

Equity markets in Europe responded positively to the expected stability in monetary policy, with select benchmark indexes rising modestly on the day.

Steady rates are seen as a supportive backdrop for corporate planning and financial markets. Bond yields in the euro area remained relatively stable, reflecting the broad expectation of unchanged ECB policy.

However, some analysts cautioned that prolonged inactivity in monetary policy could limit the ECB’s flexibility should unexpected shocks materialise.

Disinflation below target may eventually necessitate policy adjustments, depending on incoming data. Market participants will closely watch forthcoming inflation and activity reports for additional clarity.

Currency markets showed measured reactions, with the euro holding steady against major peers amid balanced macro signals.

Traders said the ECB’s outlook, combined with broader global trends, will influence FX flows and risk sentiment in the weeks ahead.

Source: Reuters