The European Central Bank is expected to maintain the deposit rate at 2%, continuing the longest period of policy stability since the end of the negative interest rate era. On February 12, a Reuters survey showed that out of 74 economists, 66 believe the central bank will remain on hold at least until the end of 2026.
The eurozone's inflation rate fell to a 16-month low of 1.7% in January, which has prompted some decision-makers to warn against excessive price slowing, but the overall economy still shows resilience. The ECB reiterated in its February 5 meeting that inflation is expected to stabilize around the 2% target in the medium term and emphasized that it will decide on the subsequent path in a data-dependent manner at successive meetings, without pre-committing to a specific interest rate direction.
The continuation of this policy pause will provide a stable monetary environment for the eurozone economy, but it also highlights the policy dilemma faced by the central bank in responding to a complex economic situation.
<h2>Record Length of Policy Pause</h2>
The current rate pause by the ECB has officially become the longest period of policy stability since the abolition of the negative interest rate policy. This stance indicates that the decision-making body believes the current interest rate level represents the optimal balance between supporting economic recovery and pushing inflation back to the 2% target.
Looking back at the policy trajectory, the ECB implemented negative interest rate policies from 2014 to 2019, with the deposit facility rate remaining in negative territory for an extended period. Since the start of the rate hike cycle in 2022 and the formal exit from the negative interest rate era, after several rounds of tightening adjustments, it has now entered a sustained observation period of policy inaction, with the pause duration exceeding any previous stable intervals.
<h2>Market Fully Priced In</h2>
The expectation of the ECB continuing its rate pause has been fully absorbed by the market. Recent trends in eurozone bond yields and the foreign exchange market indicate that investors have completely factored in the scenario of the central bank maintaining the current policy unchanged.
For the market, the extension of the rate stability period means that the financing environment will remain stable for the foreseeable future, providing a relatively clear macro backdrop for financial decisions by businesses and households. Currently, the focus of trading is shifting from &#34;whether to pause&#34; to &#34;when to pivot.&#34; Any incremental signals regarding future policy paths, especially adjustments to assessments of economic growth and inflation prospects, could become key variables triggering market volatility

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The European Central Bank is expected to keep the deposit rate unchanged at 2%. A Reuters survey showed that out of 74 economists, 66 expect the central bank to remain on hold at least until the end of 2026. Eurozone inflation fell to a 16-month low of 1.7% in January, which has raised warnings from some policymakers about excessive price slowing, but the overall economy still appears resilient

- The European Central Bank (ECB) is expected to maintain its deposit rate at 2%, continuing the longest period of policy stability since the end of negative interest rates.  
- A February 12 Reuters survey indicates that 66 out of 74 economists believe the ECB will remain on hold at least until the end of 2026.  
- This prolonged policy pause is designed to provide a stable monetary environment while highlighting the ECB's dilemma in navigating a complex economic landscape.

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The European Central Bank may maintain a 2% interest rate until 2027, and cooling inflation is unlikely to shake its neutral stance