HSBC’s report discusses the European Central Bank’s (ECB) decision to maintain its key deposit rate at 2% and its implications for the euro. The report highlights that external developments and fiscal measures are expected to play a greater role in influencing the euro’s direction in 2026, given the ECB’s stable policy stance.
ECB’s steady policy impacts Euro outlook
« The ECB’s updated forecasts were hawkish, with growth projections raised to 1.2% for 2026 and 1.4% for 2027 (from its September forecasts of 1.0% and 1.3%, respectively) and only limited inflation undershooting for the next two years expected. »
« Our economists expect the ECB to maintain its current policy stance through 2026, with a possible rate increase in 2027. »
« Given this policy stability, developments in other major economies are likely to have a greater influence on the EUR’s direction. The EUR may also face headwinds if regional fiscal measures fall short of expectations or if external conditions become less supportive. »
