BlackRock: ECB hits the pause button for an extended period

December 18, 2025

Interest Rates ECB

Roelof Salomons, Chief Investment Strategist for the Netherlands and the Nordics at the BlackRock Investment Institute, shares his views on the ECB’s decision to keep interest rates unchanged.

'The European Central Bank left interest rates unchanged today – and with good reason. Growth is improving and inflation is inching towards the ECB’s 2% target. The risks to inflation remain finely balanced. ECB staff now see the euro area growing faster through to 2028 as domestic demand, especially investment, is resilient. ECB President Christine Lagarde highlighted both potential boosts to growth from rising government spending and drags from resurging geopolitical tensions. Core inflation is projected to remain near target, with headline inflation just below 2% in 2026 and 2027.

We feel the ECB is walking a tightrope, making today’s decision to keep steady the right one. An improved growth outlook clouds what the “neutral” interest rate that neither stimulates nor restricts growth is. An extended hold, with the ECB leaving interest rates unchanged, is our base case. We stay neutral on European equities and government bonds, preferring European credit over the U.S. We still see sectoral opportunities in financials, infrastructure and pharma — supported by cheap valuations, Europe’s pro-growth shift and AI adoption.'