The European Central Bank is expected to keep interest rates unchanged on December 18 and, with a high degree of probability, maintain them at current levels throughout 2026. This is the conclusion reached by the majority of economists surveyed by Reuters. The main reasons are contained inflation and a more resilient-than-expected eurozone economy.
In November, inflation in the eurozone stood at 2.2%, up slightly from 2.1% in October. Despite the increase, the figure remains close to the ECB’s 2% target and has stayed within this range throughout the year. Over the past two quarters, the eurozone economy grew by an average of nearly 1.5%, reducing the need for urgent changes to monetary policy.
A Largely Predictable Decision
All 96 economists who participated in the Reuters poll between December 5 and 10 are confident that the ECB’s deposit rate will remain at 2% at the upcoming meeting. More than 80% believe rates will stay unchanged at least until mid-2026, while nearly 75% expect this to hold through the end of 2026—up significantly from last month, when about two-thirds of analysts shared this view.
Economists note that the economy has proven far more resilient than forecasts suggested. According to Bas van Geffen, Senior Macro Strategist at Rabobank, with current inflation levels the ECB has no compelling reason to change rates in December or at several subsequent meetings.
Could Rate Cuts Come Later?
While the baseline scenario assumes stable rates, experts do not rule out future cuts. However, such a move would likely occur only in the event of a serious negative economic shock. In that case, it would not be a single cut but an entire easing cycle. For now, risks continue to tilt more toward slower growth rather than economic overheating.
ECB President Christine Lagarde said this week that the economy’s unexpected resilience to geopolitical uncertainty and trade tensions could lead to upward revisions to growth forecasts as early as December. She also emphasized that the current monetary policy stance is “in a good place.”
What This Means for Cyprus
For Cyprus, keeping ECB rates at 2% is particularly important. It implies relative stability for mortgage rates, consumer financing, and corporate borrowing. For the real estate market—one of the island’s key economic drivers—the absence of rate hikes reduces pressure on buyers and investors, especially foreign ones.
Cypriot households and businesses have already felt the impact of previous rate cuts: in the year up to June, the ECB reduced key rates by 2 percentage points and has kept them unchanged since. Stable rates help contain growth in monthly loan repayments and support consumer demand.
Inflation and Growth Outlook Through 2026
According to the median forecast of economists, eurozone inflation at 2.2% in the current quarter is expected to ease to 2.1%, and then fall to 1.7% in the first quarter of 2026. This would place inflation below the ECB’s 2% target throughout 2026.
Eurozone economic growth is expected to average 1.4% this year and slow to 1.1% in 2026. Economists point to ongoing downside risks, including a weakening labor market and potential disappointment from stimulus measures in Germany.