FILE PHOTO: European Central Bank (ECB) President Christine Lagarde addresses the media after the ECB's Governing Council meeting, at the ECB headquarters in Frankfurt, Germany, September 11, 2025. REUTERS/Kai Pfaffenbach/File Photo

By Indradip Ghosh

BENGALURU -The European Central Bank has finished cutting interest rates as inflation holds around its 2% target and the economy marches steadily on, according to a growing majority of economists in a Reuters poll.

While inflation picked up slightly to 2.2% last month from 2.0% in August, accounts of the ECB's September 10-11 meeting stated its policy was "sufficiently robust" to manage any inflation shocks.

The central bank kept rates on hold last month and offered a modestly upbeat assessment of the bloc's economy.

NO CHANGE EXPECTED ON OCTOBER 30

The ECB, which cut the deposit rate by 200 basis points between June 2024 and June 2025, will keep it unchanged at 2.00% on October 30 for a third straight meeting, all 88 economists in the October 15-22 Reuters poll said.

Nearly 72%, 63 of 88, said the ECB would hold its deposit rate this year, while 57% - 45 of 79 - saw no change by the end of next year.

Last month, slightly less than half expected rates to be unchanged at end-2026. Rate futures are narrowly pricing a 25 basis point cut by end-2026.

"A lack of softening in recent (economic) activity and inflation data closes the window for an additional ECB 'insurance cut'. We are dropping what would have been the last cut from our forecast and now foresee the policy rate staying at 2.00% until the end of 2026," said Shaan Raithatha, senior economist at Vanguard.

That contrasts with expectations for two more rate cuts from the U.S. Federal Reserve this year, where a weakening labour market is taking precedence over rising inflation risks, partly stoked by tariffs, a separate Reuters survey showed.

The euro zone is handling U.S. trade barriers better than previously expected, leaving inflation risks "quite contained", ECB President Christine Lagarde said on September 30.

Inflation will average around 2% each year through 2027, poll medians showed, largely unchanged from last month.

STABLE GROWTH OUTLOOK

The growth outlook also remained stable amid hopes of fiscal spending, particularly from Germany - the bloc's biggest economy. The euro zone economy will expand 1.2%, 1.1% and 1.4% this year, next year and in 2027, respectively, the poll predicted.

But that stable outlook has downside risks. A majority of economists - 24 of 30 - who responded to a separate question said the euro zone economy was more likely to grow slower than they expect over the coming year than faster.

"Euro zone resilience is what is driving the steady outlook ... But the risk is still clearly to the downside both in terms of growth and inflation," said Carsten Brzeski, global head of macro at ING.

"Political instability is very likely to bring down French growth. In Germany, we're now seeing growth optimism is being hit and it could very well be it takes longer than expected before the stimulus story shows up."

Germany's economy is forecast to grow a mere 0.2% this year and 1.1% in 2026, largely unchanged from July's forecasts, despite optimism around infrastructure spending plans. Growth in France will be 0.6% this year and 0.9% in 2026, the poll predicted.

(Other stories from the Reuters global economic poll)

(Reporting by Indradip Ghosh; Polling by Renusri K and Debrah Gomes; Editing by Alison Williams)