MarketInsights

The European Central Bank’s run of interest-rate cuts appears to be winding down, as inflation drifts back toward the ECB’s 2% goal and growth remains steady, Executive Board member Isabel Schnabel said Thursday in Brussels. 

Schnabel said the ECB’s cycle of rate reductions was drawing to a close now that “medium-term inflation is stabilizing around target.” She noted that the underlying consumer-price growth forecast at 1.9% in both 2026 and 2027 sits “right at target.” 

Even with recent trade tensions, she added, the outlook for growth is “broadly stable,” and the ECB policy “has been smoothly transmitted to financing conditions, which are no longer restrictive.”

Over the past year, the ECB has cut rates eight times. Last week, President Christine Lagarde said that further easing is likely coming to an end. 

She pointed out that the bank is “well placed to deal with prevailing uncertainties,” especially those tied to US trade policy.

In its most recent projections, the ECB sees inflation dipping to 1.6% in 2026 before rising back to 2% in 2027 and expects growth to pick up thanks to extra public spending in Germany.

Speaking to China’s CCTV on Thursday, Lagarde said, “We have stabilized prices at the level that we were expecting, we are within range of our medium-term target, which is 2%, and we are in a good position to withstand future shocks.”

Despite the broad view that rate cuts are nearly over, some policymakers still leave the door open for extra easing. The ECB’s deposit rate now stands at 2%, a level regarded as roughly neutral, neither tightening nor stimulating the demand. 

Earlier Thursday, Governing Council member Gediminas Simkus urged a pause in future reductions, citing “very big uncertainty” over US tariff policy. France’s François Villeroy de Galhau said he holds no “fixed position” on what should come next.

Czech president wants the country to adopt the Euro

In Prague on Wednesday, Czech President Petr Pavel made the case for the country to adopt the euro, saying that doing so would boost trade and ensure the Czech Republic isn’t sidelined in key decisions. 

In an interview with Bloomberg Television’s Kriti Gupta, the 63-year-old president argued that keeping the koruna brings limited benefits.

“Most of our export-oriented companies are already working with euro on a daily basis,” Pavel said. “It makes great sense to adopt the euro as quickly as possible because… we don’t want to stay behind.”

His remarks came just a day after Czech National Bank Governor Aleš Michl defended the koruna, saying it helped curb inflation by allowing higher interest rates than those in euro-area nations. 

Exporters have long backed the switch to the euro, but polls show at least half of Czech voters oppose it. And with the two largest parties in parliament also against joining, the process is unlikely to start soon.

Still, Pavel said he plans to keep pushing for change, pointing to the successful euro adoptions in other eastern European Union members like Slovakia and Croatia. “Sooner or later I believe that rational reasons will bring us to the adoption of the euro,” he said. “But it will take some time.”

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