Market and economic consensus: ECB will not adjust rates. That is the expectation for now. Deposit Facility Rate is 2.00% (set in June 2025). The Governing Council has indicated that the disinflation cycle is finished and that rates are “close to or at the end of the monetary policy cycle.”

The next big central bank event on the horizon is the next European Central Bank monetary policy meeting will take place on Thursday, October 30, 2025. ECB Governing Council sits, followed by interest rate decision and a press conference by President Christine Lagarde.

Context/Expectation:

• The prevailing sentiment suggests the ECB is in a rate-cutting cycle, having already cut its key rates earlier this year (e.g., in June).
• The current key interest rates (as of June 2025) are:

• Market Attention: While a rate cut towards the end of the year (e.g., December) is expected, the ECB generally grants months without fresh quarterly economic forecasts (released in September) its break from rate reductions. The market will therefore seek any surprise and, more importantly, forward guidance by President Lagarde for the rate direction in December and the early part of 2026. Specifically, any commentary on the resilience of the labor market and growth in negotiated wages will be scrutinized, as this is the primary domestic inflation driver.
• The ECB’s nominally targeted Main Refinancing Operations Rate is 2.15%. Any change, likely a 25-basis point cut (to 1.90% if it were to happen), would be a principal market mover.

Central Bank Policy and the 2% Target

Central banks such as the ECB have price stability as their principal mandate and interpret that as maintaining inflation at 2% over the medium term. The 2% target is symmetric, and therefore the central bank does not mind as much if inflation is too low (below 2%) or too high (above 2%).

With inflation still expected to average 2.1% in 2025, the central bank would regard the disinflation process as extremely complete or policy stance already appropriate.

They would likely feel confident that the current level of interest rates would be sufficient to ensure that inflation would be taken back to the 2% target over the medium term.

Why Further Cuts Would Be Unlikely

Since inflation is anticipated already to be this close to the target, cutting rates further would increase the risk of inflation moving above 2.1% and gaining hold, and that would be a policy mistake. All the central banks believe in the idea of a neutral interest rate, a rate which is neither stimulating nor tightening the economy.

When they feel they are nearing it, and inflation is near the target, they begin to “wait and see,” hoping to observe whether the upcoming data will cause inflation to level off at 2% sustainably.

The central banks have a “meeting-by-meeting” and “data-dependent” approach. A 2.1% forecast would be pleasant, but they would seek hard economic and financial data to confirm the course.

Only if overall economic prospects are sound and inflation threats are even-handed would they think no more easing of policy. In short, a medium-term prediction of 2.1% is essentially a success for the central bank in signaling the end of the easing cycle, not a case for more rate cuts. Reductions would only come back if economic prospects fell significantly or if inflation projections were marked down sharply below 2% (e.g., to 1.5%).

General Economic Outlook

Expects to stay close to the 2% goal in the medium term, with an average of 2025 estimated at about 2.1%. The September projections confirmed that inflation is expected to settle around 1.7%-1.9% in 2026 and 2027, well within the “medium-term target” range, removing any pressure for immediate action.