Crédit Mutuel AM: The ECB is still far from a new rate cut

16 december 2025

ECB

By François Rimeu, Senior Strategist, Crédit Mutuel Asset Management

The message from the European Central Bank (ECB) is unlikely to fundamentally change at its upcoming December meeting. The ECB is expected to keep its monetary policy unchanged and maintain a message similar to previous meetings.

Recent remarks by ECB board member Isabel Schnabel have reinforced the view that a rate cut in the near term is highly unlikely: she appears rather comfortable with current market expectations (which show no change over the next 12 months, and even a low probability of rates rising).

Our expectations:

The deposit facility rate should remain set at 2%, supported by resilient growth and controlled inflation.
Christine Lagarde is expected to temper market expectations regarding a potential rate hike in 2026;
To do so, she will likely rely on the ECB’s new macroeconomic projections.
These projections should point to a better-than-expected growth scenario for both 2025 and 2026, yet still signal no inflationary pressures over the 2026–2027 horizon.
Ultimately, Christine Lagarde should reiterate the message that the ECB will continue its “meeting-by-meeting” approach, adjusting policy based on available data.

Conclusion:

The ECB is expected to signal a growth scenario better than anticipated three months ago and confirm that monetary policy is currently in a “good” position. The earlier dovish bias is unlikely to persist. As markets have largely adjusted to Isabel Schnabel’s statements, any response following the ECB meeting should be limited. In the longer term, however, we believe current monetary expectations are too high given the Eurozone’s growth potential.