The European Central Bank predicts stronger economic growth, keeps interest rates unchanged

European the central bank (EKP) decided on Thursday to keep its key interest rate unchanged, as expected. It means that the key interest rate will remain at 2.00 percent.

The ECB’s monetary policy decision-making council justifies its decision by the fact that the increase in consumer prices has slowed to near its two percent target.

“Our updated estimate confirms that inflation should stabilize at the target level of two percent in the medium term,” said the CEO Christine Lagarde at the press conference.

Thursday in its published new economic forecast, the ECB predicts that economic growth in the euro area will strengthen.

According to the forecast, the economy will grow by 1.4 percent this year, 1.2 percent next year, 1.4 percent in 2027 and 1.4 percent in 2028.

In September, the central bank predicted that the euro area economy would grow by 1.2 percent this year, 1.0 percent next year and 1.3 percent in 2027.

The ECB estimates that inflation will slow to 1.9% next year and 1.8% in 2027, but will accelerate to 2.0% in 2028.

“The estimate of inflation for 2026 has been revised upwards mainly because the price inflation of services is now expected to decrease more slowly than anticipated,” the council states in its statement.

Director General Lagarde emphasized at the press conference that the economy of the euro area has withstood the uncertainty caused by the trade war well.

“By sector, economic growth was dominated by services, especially in the information and communication sector, while activity in industry and construction remained unchanged. This growth driven by services will probably continue in the near future.”

According to him, the euro area economy also benefits from a strong labor market.

“The unemployment rate, which was 6.4 percent in October, is close to its historical low, and employment increased by 0.2 percent in the third quarter. At the same time, labor demand continued to cool, and the number of job openings was at its lowest since the pandemic.”

The news is updated.