Eurozone: ECB holds rates in September – UOB Group

The European Central Bank (ECB) kept its policy interest rates on hold on Thursda (11 September). The interest rates on the deposit facility, the main refinancing operations and the marginal lending facility remain unchanged at 2.00%, 2.15% and 2.40% respectively. These rates have been at the lowest level in more than two years, since Jun 2025 — when the ECB cut by 25 bps. The ECB has cut its key interest rate eight times in total since June 2024, bringing it down from a record-high of 4.00%, UOB Group's Economist Lee Sue Ann reports.

ECB to make a final 25 bps rate cut at the December meeting

"The European Central Bank (ECB) kept interest rates unchanged on Thursday. The forward guidance was kept unchanged, with the ECB saying that 'it will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance'."

"The ECB sees headline inflation averaging 2.1% in 2025, 1.7% in 2026 and 1.9% in 2027. For core inflation, it expects an average of 2.4% in 2025, 1.9% in 2026 and 1.8% in 2027. The economy is projected to grow by 1.2% in 2025. Growth for 2026 is now slightly lower, at 1.0%, while the projection for 2027 is unchanged at 1.3%."

"We had flagged that the ECB is approaching the end of its current rate cutting cycle. While it is becoming more apparent that the bar for yet another rate cut remains high, we think the door to another rate cut is still open, and we expect a final 25 bps rate cut, likely at the December meeting."