The European Central Bank (ECB) is expected to keep interest rates steady this Thursday, maintaining the main refinancing rate at 2.15%. This decision follows a series of significant cuts that began in mid-2024. Right now, inflation is close to 2%, and economic growth is more stable than anticipated. Because of this, policymakers are taking a step back to assess the impact of previous rate cuts.

Market Interest

Market focus will be on new staff projections and any comments about political risks in France or global trade tensions. Overall, the belief is that the policy will stay the same until the year’s end, with any changes possibly happening in 2026. We expect the European Central Bank to hold steady this week, which should help reduce interest rate fluctuations. With inflation now under control, the period of aggressive rate cuts that started in mid-2024 seems to be ending for now. This stability suggests we should rethink our strategies regarding large, sudden rate changes. Recent Eurostat data backs this up, showing an August 2025 inflation estimate of 2.1% and second-quarter GDP growth at a modest 0.3%. These numbers are ideal for the central bank, supporting a wait-and-see strategy through the end of the year. This reinforces our belief that the ECB has met its immediate goals.

Strategies and Risks

This situation is good for strategies that benefit from low volatility and the passage of time. We should think about selling short-dated options on Euribor futures, as implied volatility is likely to drop after Thursday’s meeting confirms the steady policy. The market currently predicts less than a 10% chance of any rate change before 2026. However, we need to be aware of potential risks, such as ongoing trade talks with the US and political uncertainty in France. Reviewing past market movements during the French election cycle of 2024 shows that political news can quickly create volatility. Therefore, holding some inexpensive long-dated options as a safeguard against unexpected events is a wise strategy. Create your live VT Markets account and start trading now.

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