The European Central Bank (ECB) is expected to end its interest rate cutting cycle after data showed the eurozone economy was stabilizing and inflation was close to its 2% target. According to a Reuters poll, 66 of 69 economists predicted the ECB would keep the deposit rate at 2% at its September 11 meeting. This is in contrast to the US Federal Reserve, which is expected to cut rates this month.
Claus Vistesen of Pantheon Macroeconomics described the current situation as a “soft landing” with inflation under control and unemployment at record lows. Nearly 60% of economists expect rates to remain flat this year, while a minority see them at 2% or higher through the end of 2026.
Inflation forecasts show a small increase to 2.1% in August, but are expected to remain stable until at least 2028. The eurozone economy is forecast to grow 1.2% this year, 1.1% next year, and 1.4% in 2027. Expectations of fiscal support, particularly from Germany, also support this positive outlook.
However, risks remain. The German economy contracted 0.3% last quarter on weak US demand, while political instability in France and Spain added to the uncertainty. Even so, analysts believe the region has a good chance of sustaining sustained growth through 2026 and beyond.
