European Central Bank account confirms December decision to keep key interest rates unchanged

The European Central Bank published the account of its 17-18 December 2025 monetary policy meeting, showing the Governing Council agreed to leave the three key ECB interest rates unchanged and to maintain a data-dependent, meeting-by-meeting approach with no pre-commitment to a particular rate path. The discussion judged inflation to be “in a good place” and expected to stabilise at the 2% target over the medium term, while the euro area economy was seen as resilient. Markets had priced out further cuts in 2026 and increasingly expected rates to remain stable for an extended period, with the next move eventually seen as a hike. The December Eurosystem staff projections put HICP inflation at 2.1% in 2025, 1.9% in 2026, 1.8% in 2027 and 2.0% in 2028, with the return to 2% in 2028 partly linked to the EU Emissions Trading System 2 (ETS2), now assumed to start in 2028, and GDP growth at 1.4% in 2025, 1.2% in 2026 and 1.4% in both 2027 and 2028. Members highlighted stickier services inflation and a larger-than-expected rise in compensation per employee as key uncertainties, alongside two-sided risks from geopolitics, trade tariffs, competitive pressures from China, fiscal and defence spending, and potential global market repricing. The account also noted elevated financial stability vulnerabilities, including risks of spillovers from US markets, increased euro area exposure to US equities via funds, and growing interconnections between banks and non-bank financial intermediaries. The next monetary policy account is foreseen for release on 5 March 2026.