ECB, BOE, Swiss National Bank, Riksbank interest rate decisions
A projection of a Euro currency sign is seen on the facade of the European Central Bank (ECB) headquarters in Frankfurt am Main, West Germany, on December 30, 2025.
Kirill Kudryavtsev | Afp | Getty Images
Before the war against Iran began in late February, European central banks had a more positive inflation outlook as interest rates remained stable or continued to fall across the region.
But the conflict disrupts the economic balance, threatening Europe’s energy supply, growth and the outlook for consumer prices. Expectations regarding interest rates have risen across the continent.
On Thursday, the European Central Bank, Bank of England, Swedish Riksbank and Swiss National Bank will announce their latest monetary decisions. Each central bank is also likely to offer its first comments on how the US and Israel’s Iran war, which started in late February, will affect their decision-making.
Expectations have risen
Even before the war started, the ECB was not expected to change its stance on the benchmark interest rate, with eurozone inflation data remaining near the central bank’s 2% target. Eurostat’s latest breaking data showed inflation in the euro zone increased to 1.9% It increased in February from 1.7% in January.
European Central Bank President Christine Lagarde repeated her mantra at the central bank’s last meeting in February that the euro zone’s economic outlook was “in a good place” but warned against complacency. His warning now appears to be well-founded.
Traders will be closely watching the European Central Bank’s guidance on Thursday for clues on how the bank might respond as Iran’s closure of the Strait of Hormuz reduces oil and gas supplies to the region, increasing energy costs and inflationary pressures.
“On Thursday, we expect the ECB to keep the deposit rate at 2% at its sixth consecutive meeting,” PIMCO portfolio manager Konstantin Veit noted this week, adding: “We expect the ECB to highlight increasing geopolitical uncertainty and signal a more hawkish tone rather than immediately mobilizing policy.”
“In our view, new staff forecasts will likely show a short-term inflation overshoot driven by higher energy prices before inflation returns to 2% next year,” he said, expecting headline inflation to peak around 3% this year with energy contributing roughly 1 percentage point.
Bank of England
The Bank of England was expected to reduce the key interest rate, known as the ‘Bank Rate’, at its meeting in March, easing the pressure on households and businesses struggling with high borrowing costs.
Bank of England (BOE) Governor Andrew Bailey during the Monetary Policy Report press conference at the bank’s headquarters in the City of London on Thursday, August 1, 2024.
Bloomberg | Bloomberg | Getty Images
But economists say the effects of the war are waning The probability of being cut is decreasing. The central bank’s monetary policy committee (MPC) will now likely err on the side of caution and keep the Bank Rate at 3.75% as it waits to see how long the conflict might last.
“The Bank of England is unlikely to surprise this week,” John Wyn Evans, head of Market Analysis at Rathbones, said in an emailed analysis.
“Rate cuts that were once considered reasonable for the spring are fully priced in and an increase later in the year cannot be ruled out,” he said. Wyn Evans said that since the duration of the conflict is uncertain, “the most likely outcome is a holding pattern: not tightening, but certainly not loosening until the fog lifts.”
Swiss National Bank
The Swiss National Bank is also expected to keep its main policy rate at 0.00% on Thursday. According to Dani Stoilova, UK and Europe Economist at BNP Paribas Markets 360, the Swiss economy is less exposed than others to macroeconomic shocks arising from turmoil in the Middle East.
“The Swiss economy is in a better position than its European peers to handle a potential energy price shock, with our analysis finding the impact on growth and inflation relatively limited,” he said in emailed comments.
Swiss National Bank (SNB) on Thursday, December 12, 2024 in Bern, Switzerland.
Stefan Wermuth | Bloomberg | Getty Images
While increased volatility and aggressive fluctuations in the Swiss Franc (CHF) could increase the scope for currency intervention, BNP Paribas “does not anticipate market views on the potential for SNB intervention to meaningfully reduce safe-haven inflows amid geopolitical uncertainty.”
“We see that the CHF continues to be supported,” the bank said.
Riksbank of Sweden
Like its European peers, Sweden’s Riksbank is expected to keep its main policy rate steady at 1.75% at its meeting on Thursday.
“Incoming growth and inflation data are weak, with inflation poised to fall sharply to 1% this year,” JPMorgan economists Allan Monks and Fabio Tomasoni said in emailed comments last week. he said.
“But higher energy prices should ease concerns about the potential decline in inflation expectations.” they added. JPMorgan expected the rate path to remain stable over the next three quarters.
