Preview of the European Central Bank meeting - set to hold rates as euro zone growth firm

ECB's Interest Rate Policy and Economic Situation

The European Central Bank (ECB) is expected to keep interest rates unchanged at this Thursday's policy meeting. This decision reflects the strengthening of the eurozone economy and that inflation remains anchored near target. Recent economic data have outperformed ECB’s forecasts, easing concerns about significant growth undermining global trade disruptions. In particular, strong domestic demand in Germany helps offset weakness in manufacturing across the bloc.

Inflation and Policy Stability

Inflation has hovered around the ECB's 2% target, primarily driven by firm price growth in the services sector, with underlying price pressures appearing contained. Given this backdrop, there is little expectation for rate adjustments. The market anticipates rates to remain on hold well into 2026 and 2027.

Future Outlook

ECB President Christine Lagarde is expected to provide no guidance on the next policy move, emphasizing the importance of data dependence. This is likely to reinforce market perceptions that the ECB is comfortable with its current stance. Overall, the outlook for the eurozone economy remains robust, supporting the committee’s position of maintaining interest rates.