European Central Bank set to keep interest rates unchanged for the second consecutive meeting

EUR/USD

FXStreetSep 11, 2025 7:00 AM

The European Central Bank is set to maintain key rates for the second consecutive meeting on Thursday.
The focus is on hints on the ECB’s interest rate outlook amid stronger-than-expected Eurozone inflation and growth.
The ECB policy announcements and updated forecasts are expected to rock the EUR/USD pair.

The European Central Bank (ECB) is widely expected to hold its key interest rates following the September monetary policy meeting. The decision will be announced on Thursday at 12:15 GMT.

The interest rate decision will be accompanied by the staff’s updated economic projections, followed by ECB President Christine Lagarde’s press conference at 12:45 GMT.

The ECB policy announcements are set to stir the EUR/USD pair, as the Euro (EUR) traders will closely scrutinize the policy statement and President Lagarde’s remarks for any hints of whether the central bank is done with its easing cycle.

What to expect from the ECB interest rate decision?

Since the rate cut pause in July, the United States (US) and the European Union (EU) agreed on a trade deal, setting out 15% blanket tariffs on EU exports to the US.

The Eurozone economy growth, as measured by the Gross Domestic Product (GDP), expanded by 0.1% in the three months to June after rising by 0.6% in the previous quarter, beating the market expectations of no growth.

Meanwhile, the old continent’s Harmonized Index of Consumer Prices (HICP) rose at an annual rate of 2.1% in August, after having risen 2% in July. The reading beat the estimated 2% figure while moving above the central bank’s 2% target.

With a hotter-than-expected August inflation rate, an upbeat second-quarter GDP and the US-EU trade deal, a rate on-hold decision by the ECB is fully baked in.

However, the key question now is whether the ECB will explicitly mention an end to its rate-cutting cycle on Thursday.

“The swaps market price-in 75% odds of a 25 basis points (bps) cut in the next 12 months,” analysts at BBH noted.

In contrast, a majority of the economists polled by Reuters showed that the ECB is done lowering rates.

Further, industry experts and analysts suggested that ECB President Lagarde and some of her colleagues have set a high bar for future rate cuts, and only a deterioration in the growth outlook and a sustained deflationary trend could persuade the ECB to resume its easing trajectory.

Previewing the ECB policy announcement, analysts at TD Securities (TDS) said: “The press conference will focus on economic resilience and lower trade uncertainty.”

“When probed on risks, President Lagarde is likely to maintain that the Governing Council is well-positioned, without explicitly hinting at future rate cuts,” TDS analysts added.

How could the ECB meeting impact EUR/USD?

EUR/USD remains close to its highest level since late July in the run-up to the ECB event risk. Rising expectations of divergent policy outlooks between the ECB and the US Federal Reserve (Fed) favor Euro optimists.

Meanwhile, the French parliament voted on Monday to oust Prime Minister Francois Bayrou and his minority government over its fiscal reform plans. President Emmanuel Macron will scout for his fifth prime minister in less than two years.

However, the deepening political crisis in the Eurozone's second-largest economy is unlikely to have a significant impact on the central bank’s decision and forecast this week.

Back in July, ECB President Lagarde said that the central bank is in a “good place to hold and watch”.

In case the ECB Monetary Policy Statement (MPS) or President Lagarde conveys the same message that the central bank maintains prudence on policy outlook or explicitly signals that it is done with rate cuts, it could provide extra legs to the ongoing EUR/USD uptrend.

Any upward revisions to the inflation and growth forecasts for 2025 could also be read as hawkish, bolstering the main currency pair.

Conversely, EUR/USD could face intense selling pressure if the quarterly staff projections unexpectedly show lower growth and inflation for this year.

The downside could also unfold if the ECB refrains from providing any hints on the direction of the next interest rate move.

“EUR/USD challenges the critical 21-day Simple Moving Average (SMA) at 1.1678. However, the 14-day Relative Strength Index (RSI) indicator holds firm above 50, signalling that upside bias remains intact for the main currency pair despite the latest pullback from over two-month highs.”

“On the upside, buyers could retest the nine-week highs at 1.1780, above which the July high of 1.1830 will be targeted. Further up, all eyes will be on the 1.1900 round figure. Conversely, a sustained break below the 21-day SMA and the 50-day SMA confluence support zone near 1.1670 will open up a fresh downside toward the 1.1600 threshold. The August 27 low of 1.1574 could act as a tough nut to crack for sellers,” Dhwani added.

Economic Indicator

ECB Rate On Deposit Facility

One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.

Next release: Thu Sep 11, 2025 12:15

Frequency: Irregular

Consensus: 2%

Previous: 2%

Source: European Central Bank

ECB FAQs

What is the ECB and how does it influence the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

What is Quantitative Easing (QE) and how does it affect the Euro?

In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

What is Quantitative tightening (QT) and how does it affect the Euro?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

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