ECB Rate Cuts Are Over and Inflation Will Hold at 2%, Poll Shows

A Bloomberg survey indicates the European Central Bank (ECB) has concluded its rate-cutting cycle, with fresh projections confirming inflation will hold at its 2% target over the medium term. Respondents anticipate the deposit rate will remain at 2% through at least the end of next year, with a quarter even foreseeing rate increases in late 2026, signaling a prolonged period of monetary policy stability rather than further easing.

Analysis

Market expectations, as captured by a recent Bloomberg survey, indicate a definitive end to the European Central Bank's rate-cutting cycle. A strong consensus projects the ECB's deposit rate will remain at its current 2% level through at least the end of next year, signaling a prolonged period of monetary policy stability. This outlook is anchored by expectations that fresh ECB projections will reaffirm inflation holding at the 2% target over the medium term. Notably, a hawkish undertone is emerging for the longer term, with approximately a quarter of survey respondents anticipating at least one rate hike between mid- and late-2026. This shift from an easing bias to a stable-to-hawkish stance suggests the ECB is confident in both its control over inflation and the resilience of the Eurozone economy, a view reflected in the market's mildly positive sentiment and assessment of moderate impact.

Key Decisions for Investors

• Investors should reassess positions in European fixed income, as the end of the rate-cutting cycle removes a primary catalyst for bond price appreciation and introduces the potential for yield stabilization or a gradual upward drift.
• Equity allocations may warrant a shift toward sectors that benefit from economic stability and predictable financing costs, while exercising caution on highly rate-sensitive sectors like high-growth technology and real estate.
• Consider the potential for Euro (EUR) strength against currencies of central banks with a more dovish policy outlook, as a stable 2% ECB deposit rate could create an increasingly favorable interest rate differential.