By François Rimeu, Senior Strategist, Crédit Mutuel Asset Management

At its first meeting of the year, the European Central Bank (ECB) is expected to keep its key interest rates unchanged, continuing the stance it has maintained since last July. Its communication will aim to preserve maximum flexibility regarding the future direction of monetary policy, avoiding any explicit commitment or clear guidance on the path ahead. The lack of new macroeconomic projections during thursday’s meeting will reinforce this cautious approach. Risks surrounding the inflation outlook should be described as broadly balanced, despite ongoing divergences within the Governing Council regarding the medium‑term inflation trajectory.

Our expectations:

- The Governing Council is expected to keep its main policy rate, the deposit facility rate, unchanged at 2%, in an environment where inflation risks appear broadly balanced.
' - Communication will remain focused on a meeting by meeting, data dependent approach, without pre commitment, and will emphasize monetary policy optionality, particularly in the context of the euro’s appreciation.

In summary:

The ECB is likely to extend its pause, a stance consistent with inflation being in line with the target and activity remaining close to its potential, supported by domestic demand. However, it should reiterate that this wait‑and‑see phase does not constitute a lasting commitment.