ECB set to keep rates on hold at last meeting of the year

The European Central Bank is expected to keep interest rates in the eurozone unchanged on Thursday as policymakers navigate persistent economic uncertainty and easing inflation.

The ECB is widely expected to leave its key deposit rate, which is closely watched by banks and savers, at 2% when it announces its decision at 2:15 pm (1315 GMT).

ECB policy decisions have far-reaching effects on financial markets and influence borrowing costs for companies as well as returns for savers.

Alongside the rate decision, at their last meeting of the year the central bank is due to publish updated economic growth and inflation forecasts.

The case for caution is supported by the fact that inflation, which surged following Russia's invasion of Ukraine in early 2022, has largely been brought under control, with consumer prices in the 20-nation eurozone edging up to 2.2% in November.

For this year, the ECB currently forecasts an inflation rate of 2.1%, only slightly above its 2% target.

Following a series of interest rate cuts, the Frankfurt-based central bank kept rates on hold at previous meetings in July, September and October.

As recently as spring 2024, the deposit rate paid on funds parked by banks at the ECB stood at 4%, twice its current level.

The eurozone economy has also proved more resilient than expected despite higher US tariffs, prompting the ECB to revise up its growth outlook for the year.