LONDON, Dec 18 (Reuters) – The European Central Bank on Thursday left euro zone interest rates unchanged, as expected, and took a more positive view on the regional economy, which helped lift the euro.
The central bank for the 20 countries that share the euro raised several of its growth and inflation projections for the bloc, in a move that likely closes the door to further rate cuts in the near term.
The euro erased earlier losses to trade flat on the day against the dollar and the yen, but fell against the pound, which gained after the Bank of England earlier in the day cut UK rates but indicated the pace of lowering borrowing costs could slow further.
The euro was last at $1.1733, while two-year German bond yields, which tend to react more to changes in ECB policy, were flat at 2.146%.
ARNE PETIMEZAS, DIRECTOR RESEARCH, AFS GROUP, AMSTERDAM:
“They kept rates unchanged as expected. I think the doves lost the argument with the ECB raising its inflation forecasts a bit. The doves’ last hope for a cut was the forecasts showing inflation would undershoot in the years ahead. That won’t work anymore. Plus, the ECB raised its growth forecasts even though recent survey data was pretty disappointing.”
“The forward guidance was unchanged (could hike, cut, or hold as the next step). I don’t think President Lagarde will sing a hawkish tune during the press conference. It’s too soon and not justified by the data.”
RICHARD CARTER, HEAD OF FIXED INTEREST RESEARCH, QUILTER CHEVIOT, LONDON:
“The ECB’s decision to maintain its hold on rates comes as a surprise to no one, and 2026 looks likely to be similarly uneventful unless there is a significant shift in the economic outlook.”
“Most economists expect rates to remain unchanged throughout next year, particularly after Christine Lagarde reaffirmed her confidence that current monetary policy is well positioned. While a rate cut cannot be entirely ruled out if inflation continues to surprise on the upside, any movement is likely to be minimal for the foreseeable future.”
“For now, and likely some way into next year, the ECB will be pleased to find itself in a fairly comfortable ‘wait-and-see’ position.”
(Compiled by Amanda Cooper; Editing by Karin Strohecker)
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