SNAPSHOT2 min read

End of the road for ECB rate rises?

The European Central Bank (ECB) has kept its key interest rates unchanged for the first time since June 2022 – potentially marking the end of its rate hiking journey.



Azad Zangana
Senior European Economist and Strategist

In response to some of the highest inflation rates since the 1970s, the ECB‘s main refinancing rate has risen from zero in June 2022 to 4.5% in September 2023, while the deposit rate rose from -0.50% to 4%.

The decision not to tighten policy further was in response to a weakening eurozone economy, as manufacturers struggle with weakening domestic and external demand, while services companies are also reporting slower activity.

The inflation rate has also moderated substantially in recent months, falling from a peak of 10.6% y/y in October 2022 to 4.3% y/y in the latest data release in September. Much of this fall was caused by the impact of higher energy prices last year dropping out of the annual comparison of prices. Inflation is expected to fall further, but ECB president Christine Lagarde suggests that risks were skewed towards higher inflation.

Lagarde said: “Inflation is still expected to stay too high for too long, and domestic price pressures remain strong.”

But in reference to the decision to hold, she said: “We are determined to ensure that inflation returns to our 2% medium-term target in a timely manner. Based on our current assessment, we consider that rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.”

Although there was no indication that further rate rises were off the table, the language used suggests that the ECB would need to see a significant deterioration in the inflation outlook. Indeed, the decision to keep policy on hold was largely expected by financial markets.

Looking ahead, the next policy move is likely to revolve around the ECB’s balance sheet, and the pace of the unwind of support. Upward pressure on bond yields of late were blamed on “external factors”, but it is clear that the ECB still has one eye on the ability of countries, particularly Italy, to fund itself in an affordable and orderly manner.

As for interest rates, the next move is likely to be a cut, probably in 2024. How soon and by how much in the coming year will depend on the progress made to lower inflation back to target.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.


Azad Zangana
Senior European Economist and Strategist


Interest rates
Central banks
Economic views
Europe ex UK

Please consider a fund's investment objectives, risks, charges and expenses carefully before investing. The Schroder mutual funds (the “Funds”) are distributed by The Hartford Funds, a member of FINRA. To obtain product risk and other information on any Schroders Fund, please click the following link. Read the prospectus carefully before investing. To obtain any further information call your financial advisor or call The Hartford Funds at 1-800-456-7526 for Individual Investors.  The Hartford Funds is not an affiliate of Schroders plc.

Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser, CRD Number 105820, providing asset management products and services to clients in the US and registered as a Portfolio Manager with the securities regulatory authorities in Canada.  Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and as an Exempt Market Dealer with the securities regulatory authorities in Canada.  SFA markets certain investment vehicles for which other Schroders entities are investment advisers.”

For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security/sector/country.

Schroders Capital is the private markets investment division of Schroders plc. Schroders Capital Management (US) Inc. (‘Schroders Capital US’) is registered as an investment adviser with the US Securities and Exchange Commission (SEC).It provides asset management products and services to clients in the United States and Canada.For more information, visit

SIMNA, SFA and Schroders Capital are wholly owned subsidiaries of Schroders plc.