ECB holds rates steady, sees inflation near target by 2028
The European Central Bank's Governing Council today decided to keep its three key interest rates unchanged. Updated projections confirm inflation is expected to stabilise at 2 percent over the medium term, reaching target by 2028.
Inflation path to 2 percent
The ECB Governing Council maintained its three key interest rates, affirming that inflation is expected to stabilise at its 2 percent target over the medium term.
According to the latest Eurosystem staff projections, average headline inflation is projected at 2.1 percent for 2025, 1.9 percent for 2026, 1.8 percent for 2027, and 2.0 percent for 2028.
Inflation excluding energy and food is forecast at 2.4 percent for 2025, 2.2 percent for 2026, 1.9 percent for 2027, and 2.0 percent for 2028.
The upward revision for 2026 inflation is primarily due to a slower anticipated decline in services inflation.
The Governing Council reiterated its commitment to ensuring inflation stabilises at 2 percent over the medium term, with future rate decisions remaining data-dependent and made on a meeting-by-meeting basis, without pre-committing to a specific rate path.
Resilient economy, persistent risks
The euro area economy demonstrated resilience, growing by 0.3 percent in the third quarter, driven by stronger consumption, investments, and exports.
Services, particularly information and communication, were key drivers.
The labor market remains robust, with unemployment at 6.4 percent in October, near its historical low.
Domestic demand is expected to be the main growth engine in the coming years, supported by rising real incomes and a gradual decline in the savings rate.
However, geopolitical tensions, particularly Russia's war against Ukraine, and a volatile international environment continue to pose significant uncertainty.
The ECB also highlighted the need to strengthen the euro area through sustainable public finances, strategic investments, structural reforms, and further capital market integration, including the rapid adoption of the digital euro regulation.