Since the ECB’s last meeting in July, eurozone growth and inflation have both exceeded expectations and a new EU–U.S. trade deal has reduced some of the uncertainty about the region’s economic prospects. At the same time, fresh political risks have also materialized, notably with the collapse of the French government over spending cuts at the start of what is likely to be a tense budget drafting season around much of the eurozone.
None of this has substantially changed the Bank’s economic outlook for now. In a new set of forecasts published Thursday, the Bank only slightly raised its growth forecast. It now expects the economy to expand by 1.2 percent this year, and by 1.0 percent and 1.3 percent in the two following years. This compares to forecasts in June of 0.9 percent this year, 1.1 percent in 2026 and 1.3 percent in 2027.
New forecasts put average inflation at 1.7 percent in 2026 and 1.9 in 2027, compared to 1.6 percent and 2.0 percent projected in June. The forecast for core inflation, which excludes volatile components of food and energy, was left unchanged at 1.9 percent for next year and was trimmed from 1.9 percent to 1.8 percent in 2027.
“The ECB is done cutting rates,” said S&P Global’s chief economist for Europe Sylvain Broyer. “Sticky services and food inflation keep consumer sentiment under strain. Real wage growth still outpaces productivity, and easing the policy rates to weaken the euro would be useless in the present situation.”
Ahead of the release, most economists expected the easing cycle to be over, whereas investors still priced in a 70 percent chance of another cut — albeit not before next summer. Both groups will scrutinize President Christine Lagarde’s press conference, starting at 2:45 p.m. CEST, for guidance.
Lagarde will also face pointed questions on France’s fiscal turmoil and a possible ECB intervention, should its borrowing costs spiral. In a recent radio interview, she said the Bank is “closely monitoring” spreads, suggesting the Bank may be ready to act if needed. Her German college Isabel Schnabel, by contrast, dismissed talk of ECB intervention at the moment as “far-fetched.”