European Central Bank holds rates steady in last gathering of 2025

Investors are assessing the last interest-rate decisions of 2025, with four of Europe’s central banks announcing their monetary policies and macroeconomic outlooks on Thursday.

The European Central Bank, Bank of England, Riksbank, and Norges Bank all concluded meetings today, but only one of them changed its base rate.

European Central Bank

The ECB kept rates on hold on Thursday, as widely expected.

Ahead of the vote, investors were more interested in any commentary on the apparent growing tensions inside the governing council, with some members, like Isabel Schnabel, openly endorsing the market’s view that the next rate move will be a hike, while others think there is still room to cut. 

Christian Kopf, who heads the bond portfolio management of German asset manager Union Investment, told CNBC: “I don’t expect and rate change in the Euro area for the time being. If there is a change in 2026, most likely we will get a rate hike towards the end of 2026 or at the beginning of 2027.”

The ECB hiked its growth outlook for the euro zone, predicting growth of up to 1.4% in 2025 and 1.2% in 2026.

Norges Bank

Norway’s central bank kept rates on hold at 4% on Thursday, with economists suggesting the next rate cut might not come until summer 2026. Norges Bank announced its policy decision at 10 a.m. local time, 9 a.m. London time.

The bank said Thursday that the outlook is uncertain “but if the economy evolves broadly as currently projected, the policy rate will be reduced further in the course of the coming year.” For now, however, Norges Bank’s policymakers judged “that a restrictive monetary policy is still needed.  Inflation is still too high.” It added that its current forecast “is consistent with 1-2 rate cuts next year.”

Morten Lund, Scandinavia chief economist at JPMorgan, had commented before the rate hold that the bank’s guidance on Thursday “should be a push-back against markets’ rising expectations” that it will cut rates in March, which he said was currently seen as “a coin toss.”

Riksbank

Sweden’s central bank kept its key policy rate unchanged at 1.75% when it announced its decision at 9.30 a.m. CET, 8.30 a.m. London time.

No change is likely in the coming quarters either, according to Franziska Fischer at UBS Investment Bank, who said that the Riksbank’s easing cycle was over.

“The Riksbank cut the policy rate by 25 basis points in September but remained on hold in November, while signalling that the policy rate will likely remain unchanged ‘for some time to come’,” Fischer said.

Developments since November do not warrant a change to the rate outlook, in UBS’ view, he added.