The Governing Council has made significant decisions impacting monetary policy. On December 18, 2025, it announced that the three key interest rates of the European Central Bank (ECB) will remain unchanged. This decision aligns with their updated inflation assessments and projections.
Interest Rates Held Steady
The ECB’s key interest rates include:
- Deposit facility: 2.00%
- Main refinancing operations: 2.15%
- Marginal lending facility: 2.40%
This stability in interest rates comes as part of an ongoing effort to maintain inflation at the targeted 2% in the medium term.
Updated Inflation Projections
The Eurosystem staff has revised inflation forecasts for the coming years. They now project:
| Year | Headline Inflation (%) | Core Inflation (Excluding Energy and Food) (%) |
|---|---|---|
| 2025 | 2.1 | 2.4 |
| 2026 | 1.9 | 2.2 |
| 2027 | 1.8 | 1.9 |
| 2028 | 2.0 | 2.0 |
Inflation expectations for 2026 have been adjusted upward. Analysts now anticipate that services inflation will decrease at a slower pace than previously expected.
Economic Growth Outlook
The economic growth forecast has also been revised upward. The updated growth expectations are:
- 2025: 1.4%
- 2026: 1.2%
- 2027: 1.4%
- 2028: 1.4%
This shift indicates stronger growth driven by domestic demand, a positive sign for the euro area economy.
Data-Dependent Approach
The Governing Council will adopt a data-dependent and meeting-by-meeting approach for future monetary policy decisions. This strategy will focus on:
- Assessing the inflation outlook.
- Evaluating risks related to inflation.
- Considering incoming economic and financial data.
There is no predefined path for interest rate adjustments, allowing for flexibility in response to economic conditions.
Preserving Price Stability
The ECB remains committed to ensuring that inflation stabilizes at its target. The Governing Council is prepared to utilize all available instruments to support this goal. This includes the Transmission Protection Instrument, which aims to mitigate adverse market dynamics and safeguard monetary policy transmission across all euro area nations.
The President of the ECB is scheduled to provide additional insights into these decisions in a press conference at 14:45 CET today. This dialogue will shed light on the rationale behind the current monetary policy stance and the path forward.
