European Central Bank monetary policy meeting of December 17-18, 2025

The European Central Bank’s Governing Council convened in Frankfurt am Main on Wednesday and Thursday, 17-18 December 2025, to review financial, economic, and monetary developments.

Key topics included the assessment of euro area financial conditions, macroeconomic outlook, inflation expectations, and monetary policy stance.

Since the previous meeting in October 2025, macroeconomic data had been resilient, reinforcing expectations that inflation would remain close to the 2% target over the medium term. Financial conditions had tightened slightly but remained within narrow ranges, with market expectations indicating no interest rate cuts in 2026 and a potential rate hike beyond 2026, possibly as early as 2027 or 2028.

Inflation was expected to stay around 2% over the projection horizon, with risks being balanced but more uncertain due to geopolitical tensions, trade policies, and external shocks. The staff projections indicated inflation would decline to below 2% in 2026 and 2027, with a return to target in 2028, supported by energy price developments and the introduction of ETS2 in 2028.

The euro area economy had grown by 0.3% in the third quarter, driven by domestic demand, with services-led growth expected to continue. Unemployment was near its historical low at 6.4%. The outlook for global activity remained resilient, though geopolitical risks and trade disruptions posed downside risks.

The Governing Council decided to keep the three key ECB interest rates unchanged, emphasizing a data-dependent approach and the importance of maintaining optionality given the uncertain outlook. Communication will continue to be cautious, avoiding any bias towards tightening or easing, and future decisions will depend on incoming data and risk assessments.

The next monetary policy account is scheduled for release on 5 March 2026.