The ECB Governing Council held its December 2025 monetary policy meeting in Frankfurt, reviewing economic developments, inflation outlook, and monetary policy options, and decided to keep interest rates unchanged.
The European Central Bank (ECB) Governing Council held its monetary policy meeting on December 17-18, 2025, in Frankfurt am Main. The meeting involved a review of financial, economic, and monetary developments in the euro area and globally.
Ms. Schnabel presented an assessment indicating that euro area financial conditions had tightened slightly since October 2025 but remained within a narrow range aligned with key policy rates. Incoming macroeconomic data suggested resilience, with expectations that inflation would remain close to the 2% target over the medium term. Market expectations for future rate hikes had shifted, with the first hike now anticipated no earlier than 2027 or 2028, and uncertainty around the policy path had decreased.
Euro area economic growth was resilient, with a 0.3% expansion in the third quarter driven by consumption and investment. Unemployment was near a historic low at 6.4%, and employment growth continued. Inflation remained around 2.1%, with recent data showing persistent stickiness, especially in services inflation. Staff projections indicated inflation would decline gradually, staying below 2% in 2026 and 2027, before returning to 2% in 2028, partly due to the delayed start of the EU Emissions Trading System 2 (ETS2).
The Governing Council assessed that risks to inflation were two-sided, with upside risks from wage growth and services inflation, and downside risks from external factors such as trade tensions and energy prices. The overall outlook suggested that inflation would stabilize around the target, supported by anchored inflation expectations at around 2%.
On monetary policy, members agreed to keep the three key ECB interest rates unchanged, citing the resilience of the economy, the supportive fiscal environment, and the inflation outlook. The Council emphasized a data-dependent approach, maintaining full optionality to adjust policy as needed, and highlighted the importance of prudent communication to avoid signaling a bias in future rate moves.
The Governing Council also discussed risks related to financial stability, noting elevated vulnerabilities due to geopolitical tensions, high equity valuations, and interconnectedness of financial sectors. Despite these risks, euro area banks remained resilient, supported by strong capital and liquidity positions.
The next monetary policy account is scheduled for release on March 5, 2026.
For more details, visit the official ECB press account: ECB press account December 2025.
