Report: ECB officials say the rate-cut cycle is likely over.

On Thursday, according to media reports citing informed sources, based on the latest assessment of economic growth and inflation prospects, European Central Bank officials expect that the current interest rate cut cycle is most likely over. Unless another major external shock occurs, after eight consecutive rate cuts from the peak of 4%, the deposit rate should be able to remain at 2%. However, the officials believe it is still too early to talk about rate hikes.

The spokesperson for the European Central Bank declined to comment on the above report.

This view aligns with expectations from economists surveyed before Thursday’s rate decision. They generally believe that the European Central Bank will remain on hold over the next two years. Investors have also reflected in pricing that the likelihood of any rate hike or cut in the short term is very low.

The yield on two-year government bonds in the euro zone, which is most sensitive to monetary policy, rose nearly 1 basis point to 2.14% after this news was released, then gave back some of the gains.

After deciding to keep rates unchanged at Thursday’s meeting, European Central Bank officials raised their economic growth outlook, and predict that after inflation rates drop below target in 2026 and 2027, inflation will return to the 2% target in 2028. However, core inflation, excluding volatile factors, is expected to be stronger than overall inflation.

A policymaker warned that if inflation remains below the target for several months, further easing cannot be ruled out.

European Central Bank President Christine Lagarde stated that Thursday’s meeting did not discuss either rate hikes or rate cuts. “Council members unanimously agreed that all policy options should remain open, and we will continue to make decisions meeting by meeting, relying on data. We have not set a fixed direction for the future rate path.”

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