The European Central Bank is expected to hold interest rates steady on Dec. 18, marking the fourth consecutive meeting without a cut since the central bank lowered rates by 0.25 percentage points on June 11.
“Since the ECB’s October meeting, the incoming data has done very little to justify any rate change on Dec. 18,” said ING’s chief economist Carsten Brzeski.
“While third-quarter GDP growth was clearly stronger than the ECB expected, sentiment indicators also point to continued resilience.”
At the same time, the fundamentals of the eurozone economy have not materially changed. US tariffs still weigh on exports, investment is being held back by uncertainty, and 2026 growth remains highly dependent on German fiscal stimulus, he said.
What Are the Key ECB Interest Rates?
The first ECB rate cut came in June 2024 and a total of eight rate cuts have taken the deposit facility rate from 4.00% to the current level of 2.00%. Since June 11, the ECB’s three policy rates stand at:
Deposit Facility Rate: 2.00%Main Refinancing Rate: 2.15%Marginal Lending Facility: 2.40%Will the ECB Hike Rates in 2026?
Money markets are also pricing in largely unchanged rates for next week, but October 2026 implied rates are above the current level—a significant shift compared with just over a week ago when swap markets anticipated lower rates within the next year.
ECB executive board member Isabel Schnabel told Bloomberg in an interview on Dec. 8 that eurozone growth risks “are clearly tilted to the upside” and that “risks to inflation are tilted to the upside.”
She said that services inflation and wage growth have been stronger than anticipated, and demographic labor pressures and rising inflation expectations are emerging just as the economy strengthens and fiscal policy turns expansionary.
With the ECB’s mandate to maintain price stability at 2% inflation, higher inflation could justify higher rates, not cuts, economists say.
Ulrike Kastens, economist at DWS, said that after Schnabel’s interview, speculation has grown that the next move could be a rate hike: “Against this backdrop, ECB president Christine Lagarde is likely to keep all options open, also pointing out that the ECB is not committing to a monetary policy course in advance.”
“In fact, the new inflation projections and the expected slowdown in wage growth are likely to confirm our expectation that the deposit rate should remain unchanged at 2.0% in 2026,” she said.
Michael Field, Morningstar’s chief European market strategist, said that inflation is still set to undershoot in 2026 and growth will remain weak overall: “Then there is nothing holding the ECB back from further rate cuts.”
And ING’s Brzeski does not expect an interest rate hike.
“Looking beyond next week, we don’t think that Schnabel’s comments currently reflect the ECB’s majority view. With expected sub-2% inflation forecasts for the next three years, we see any following ECB rate change as a cut, not a hike, at least through late spring next year,” he said.
“After that, the window for rate cuts will likely close, and fiscal stimulus that meets supply-side constraints could bring back inflationary pressures. But that is a 2027 story, rather than one for 2026.”
Will the ECB Revise Its Growth and Inflation Outlook?
ECB staff will present new forecasts on eurozone inflation and growth at the Dec. 18 meeting, including projections for 2028 for the first time.
Brzeski does not believe that Schnabel’s assessment will be reflected in ECB projections and that it’s very unlikely that the central bank will change the longer-term growth trajectory of 0.3% quarter over quarter growth in 2026 and 2027.
“Regarding inflation, the 2026 forecast may be raised slightly (from 1.7% year-on-year in the September projections), while 2027 should be revised downward due to the delayed implementation of ETS2.”
The EU parliament and council postponed the EU emissions trading system for buildings, road transport and small industry, or ETS2, by one year, from 2027 to 2028, as national governments raised concerns about higher costs for consumers.
The delayed implementation of the ETS2 should push expected inflation by around 0.2 percentage points from 2027 to 2028, Brzeski said.
The staff economist may also revise up the growth forecasts.
“GDP growth expectations in the region are certainly not amazing, but they are improving,” said Morningstar’s Field. “This should provide a solid backdrop for European equities next year.”
When Are the ECB Meetings in 2026?Feb. 5, 2026March 19, 2026April 30, 2026June 11, 2026July 23, 2026Sept. 10, 2026Oct. 29, 2026Dec. 17, 2026
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