The European Central Bank is expected to leave interest rates unchanged on Thursday, 30 October 2025, marking a third consecutive meeting on hold as inflation sits at target and growth remains steady, albeit modest.
The pause follows cumulative cuts of two percentage points in the year to June. While major peers such as the Federal Reserve, the Bank of England and the Bank of Japan are still grappling with inflation overshoots or fragile demand, the ECB has signalled contentment with current settings and little urgency to move.
President Christine Lagarde will chair the meeting in Florence rather than Frankfurt. Her recent messaging has stressed that the Governing Council is in a “good place”, with policy guided by incoming data, tolerance for small deviations from the 2% target, and no appetite to “overengineer” the stance. Markets broadly concur that near-term action is unlikely; all 88 economists polled by Reuters ahead of the meeting anticipated no change in October.
Even so, the balance of risks leaves the door ajar to further easing. The evolving United States tariff regime has yet to feed fully through to euro area activity and prices, introducing uncertainty and a possible drag that could push inflation below target. Market pricing still assigns a higher probability to the next move being a reduction rather than an increase, but with timing and conviction cautious.
Recent data have largely tracked the ECB’s baseline: growth is continuing at a modest pace and inflation is hovering around target. Purchasing managers’ indices point to improving business activity, German sentiment has brightened, and corporate surveys suggest the investment outlook is stabilising as some tariff uncertainty lifts. Offsetting these are weaker industrial readings, a sharp decline in exports to the United States, and accumulating signs of trade diversion from China, with excess supply reportedly being channelled to Europe. Together, these forces threaten to erode external demand just as domestic momentum is steady but unspectacular.
The strength of the euro adds a further complication by dampening imported inflation. The currency has steadied in recent weeks, and a more hawkish tone from Federal Reserve chair Jerome Powell following Wednesday’s US rate cut may curb further euro gains. For the ECB, the exchange rate is not a target but is a relevant factor for the inflation outlook. Bank of America argued that tighter overall financial conditions increase the risk of a more persistent undershoot, suggesting the ECB may have to reflect a softer inflation path in its December projections.
Nonetheless, most economists continue to expect a long hold at current levels, citing the prospect that trade uncertainty will fade, household balance sheets remain supported by excess savings, and fiscal policy—most notably higher German spending—will provide a tailwind to activity.
The combination of a stable labour market, growth in services and German fiscal support should aid the euro area over the coming months. If realised, that would allow the ECB to maintain its current stance without risking a material inflation miss. Policymakers have repeatedly indicated they can tolerate temporary deviations from target in either direction, provided medium-term expectations remain anchored.
The immediate test will come with the December staff projections, which are expected to include the first estimates for 2028. Any visible downgrade to growth or inflation could sharpen the debate on the need for an insurance cut, while a steady baseline would strengthen the case for an extended pause. For now, the Governing Council appears set on patience: data dependence, symmetry around the target, and a preference to avoid unnecessary complexity will guide the discussion.
Against this backdrop, Thursday’s decision is unlikely to deliver surprises. With inflation near 2% and growth neither overheating nor stalling, the ECB can afford to wait. The larger question is whether the “good place” can be sustained amid shifting trade patterns, tighter financial conditions and a still-uncertain external environment. The answer will hinge on how the euro area absorbs the tariff shock, whether Chinese trade diversion intensifies, and the extent to which domestic demand can offset external weakness as 2025 draws to a close.
‘On hold, with options open’: ECB set to pause as markets weigh 2025 rate cut odds
