ECB holds rates steady as inflation hovers just above target
Professor Joe Nellis September 11th 2025
Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm.
The European Central Bank has kept interest rates unchanged at 2%, prioritising stability as inflation remains only slightly above its target at 2.1% in August. The eurozone’s stronger-than-expected economic performance over the summer months has also reduced the immediate need for monetary stimulus.
Caution argument
"The argument for caution has been further reinforced by political and economic volatility in the Eurozone’s second largest economy, France.
Unable to pass vital spending cuts through parliament, the Government is struggling in its fight against spiralling debt. Given this precarious position, the ECB is not looking to rock the boat."
Despite interest rates already near rock bottom, the debate within the Governing Council is unlikely to be settled. Some members have been arguing that maintaining higher rates for longer is the safest course, while others believe that easing could be justified if inflation continues to cool.
Attention is now turning to the ECB’s year-end meetings in October and December. Markets are now pricing in late 2025 or early 2026 as likely turning points.
The European Central Bank will remain vigilant against any resurgence in inflation, but it must be ready to act if a disinflation trend becomes clearer. External factors remain critical, from volatile energy markets and wage negotiations to global trade tensions. For now, September’s decision is less about dramatic change and more about buying time to judge whether inflation is truly on a sustainable path back to target.
