ECB seen holding rates at 2 percent through 2026

16:00

By: Dakir Madiha

ECB seen holding rates at 2 percent through 2026

The European Central Bank is expected to keep its deposit rate at 2.00 percent at least until the end of 2026, marking what would become its longest stretch of stable borrowing costs since the end of the negative interest rate era, according to a Reuters survey published this week.

In the poll conducted from February 9 to 12, 66 of 74 economists said they do not anticipate any rate changes before 2027. That consensus has remained intact since October. The outlook follows the ECB’s fifth consecutive policy meeting without a rate move last week, when officials left all three key interest rates unchanged amid broadly steady economic conditions.

Inflation in the euro zone fell to 1.7 percent in January, its lowest level since September 2024, according to preliminary data from Eurostat. The drop from 2 percent in December brought headline inflation notably below the ECB’s 2 percent target. Core inflation was reported at 2.2 percent.

Despite the softer inflation readings, policymakers have indicated comfort with the current stance. Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics, said the ECB is in what could be described as an ideal position for a central bank. He added that over the next six months, the institution is likely either to hold the deposit rate at 2 percent or to consider cuts.

Median forecasts in the survey show inflation averaging 1.8 percent this year before returning to 2.0 percent in 2027.

Economic growth across the euro area remains steady. Output expanded by 0.3 percent in the final quarter of 2025 and is projected to maintain a similar pace through 2026, with annual growth seen at 1.2 percent this year and 1.4 percent in 2027, according to European Commission projections.

In its February 5 statement, the ECB’s Governing Council said the economy “remains resilient in a challenging global environment,” citing low unemployment, solid private sector balance sheets and higher public spending on defense and infrastructure as supportive factors.

If rates remain unchanged through 2026, it would represent the longest period of policy stability since the pandemic years, which overlapped with the final phase of the ECB’s nearly decade long experiment with negative interest rates. The central bank first introduced negative rates in June 2014 to counter deflation, eventually lowering the deposit rate to minus 0.5 percent before record inflation prompted a rapid tightening cycle starting in 2022.