The European Central Bank is likely to keep interest rates unchanged on Thursday (September 11). According to the forecasts of all 59 economists surveyed by Bloomberg, the deposit rate will remain at 2%. The new ECB forecasts are likely to show a gradual acceleration in economic growth and medium-term inflation reaching the target level.



The ECB's Governing Council will decide on monetary policy on Thursday. Due to the increased activity of hawkish members of the Council since the summer and generally strong data, including a slight increase in inflation in August, the market is currently not anticipating a policy change. Market pricing is only reflecting the probability of further rate cuts next year—already factoring in an easing of approximately 16 basis points in June 2026.

The market's current expectations of downside risks are overly optimistic. Neither the impact of the Federal Reserve's accelerated rate cuts on the exchange rate nor the potential for further improvement in the US-EU trade framework are being adequately considered. The political situation in France could further deteriorate, at least to the point of market concern. An overly hawkish ECB stance would simply add fuel to the fire, something the ECB is keen to avoid.

HSBC expects ECB to keep interest rates unchanged

HSBC expects the ECB to keep interest rates unchanged on September 11, which is consistent with its long-standing view and current market expectations. Any change in the policy rate would be a big surprise.

Since the July meeting, economic data has presented a mixed picture. August's PMI slightly beat market expectations, second-quarter GDP grew 0.1% quarter-over-quarter (although this figure is subject to downward revisions), and July's inflation data slightly exceeded consensus expectations. Meanwhile, June's trade data showed some signs of export front-running, while the announcement of the French government's vote of confidence has increased political uncertainty. The EU-US trade agreement provides some clarity (albeit with 15% tariffs), but some uncertainty regarding the details remains.

The European Central Bank (ECB) held its key deposit rate at 2.0% in July, within its estimated neutral range. ECB President Christine Lagarde emphasized that "we are in a good place" (no intention of further rate cuts, July 24). This further confirms previous comments by ECB Executive Board member Schnabel, who stated that " the bar for another rate cut is very high ."

Given this tone, the current data appears insufficient to prompt a change in policy in September. HSBC expects no significant changes to the ECB staff's September forecasts, nor any developments that would warrant a policy change. However, there have been several disinflationary signs since June, such as the appreciation of the euro and slightly higher US tariffs on the EU than in the ECB's baseline scenario. However, given the more dovish June forecasts, HSBC does not anticipate a downward revision in inflation projections .

Even so, inflation is likely to remain below the ECB’s 2% target over the next year and barely reach it until 2027. Furthermore, any further euro appreciation, the lingering impact of tariffs, and risks in the implementation of fiscal plans could adversely affect inflation .

European stock markets opened with mixed trends, awaiting ECB action

Frankfurt's DAX index was almost flat on Thursday, trading in a tight range around 23,640 points, as markets awaited the European Central Bank's monetary policy decision and a key U.S. inflation report later in the day.

The FTSE 100 rose 0.5% on Thursday, rebounding from a slight loss in the previous session and outperforming other major European stock indexes, with strength in defense, mining and energy stocks driving the gains.

European stocks edged higher on Thursday, with the Stoxx 50 edging up 0.1% and the Stoxx 600 adding 0.2%, as markets awaited key events later in the day.

Investors in the region will be closely watching the ECB's moves today, although the central bank is widely expected to not adjust its key deposit rate from its current 2%. However, market participants will still be closely watching the ECB's latest macroeconomic forecasts for the eurozone and global economy .

S&P 500 futures were steady on Thursday as Wall Street awaited August consumer price index data due in the evening.

Economists surveyed by Dow Jones expect the index to rise 0.3% from the previous month and 2.9% from the same period last year. Excluding volatile food and energy prices, the so-called core CPI is expected to rise 0.3% from July and 3.1% from the same period last year.

The previously released Producer Price Index showed an unexpected decline, rising slightly by 0.1% month-on-month and 2.6% year-on-year.

In the Asia-Pacific market, Japan's benchmark stock index, Nikkei 225, hit a record high overnight, echoing overnight gains on Wall Street.