EconoFACTS

September 11, 2025 | 10:03

ECB Stays Put... No Rush

Economist

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

The Owl has spoken.

As expected, the ECB held off on making any rash moves today. It was unanimously decided by the central bank to leave key rates unchanged: the deposit rate at 2.00%, the ref rate at 2.15%, and the marginal lending facility at 2.40%. The deposit rate is now down 200 bps since the cycle began, compared to 250 bps from the BoC, 175 bps from the BoE, and 100 bps from the Federal Reserve. Remember the list of factors we all gathered during the August meeting: policymakers wanted to see actual declines in growth, actual slowdown in inflation, and the ECB Staff forecasts. Well, since then, there has not been a notable change in growth or inflation, and the forecasts didn't change a heck of a lot either. (Those with good eyesight.... see the table below.) Yes, there was a trade deal (a signed one!) with the U.S. but European manufacturers are struggling with the details ("We have to measure the % of parts that have metal?!"). And the one with Mercusor is still ongoing.

Note the key phrases continue to be used .... "not pre-committing to a particular rate path", and they will be "data-dependent" and make decisions on a "meeting-by-meeting" basis.

The Press Conference... well, it felt very long. A few questions about France, which she declined to answer directly, but noted that bond markets were operating "smoothly, with good liquidity". Obviously, President Lagarde would not answer "Yes" or "No" when asked the first question, which was "Is the easing cycle was over?" She stressed that the Euro Area "continues to be in a good place" as the job market is solid, growth risks are more balanced, and that inflation is where "we want it to be". In fact, she emphasized that the disinflationary process was now over, but the path is not pre-determined.

She was also questioned about the assessment of risks being balanced. President Lagarde pointed to two sources of risks that have now moved off the radar: 1) risk of European trade retaliation (that was factored in the June projection); and 2) trade uncertainty has abated since June. And, perhaps as a reference to the "challenges" the BLS in the U.S. is facing, she pointed out that the Euro Area is "very lucky so far.... to have data of which the integrity is not challenged."

One more interesting tidbit: one reporter mentioned the "burden of proof", as it seemed that the economic data needed to surprise or disappoint to get the ECB to cut. Now, it needs to surprise to justify a rate cut. The ECB chief said she would not enter a discussion about that. "Let us not overengineer.... look at all the data and decide on a meeting by meeting basis."

Bottom Line: The takeaway from the hour-long press conference was no surprise... the ECB remains data dependent and will make all decisions on a meeting by meeting basis. But it does not seem eager to cut further. As it stands, we still have one more rate cut penciled in (December). Granted, there are still three more months to go and plenty can happen but we're leaning towards pulling it.