Economists predict the next shift in European Central Bank interest rates will be up, aligning with the views of investors and influential Executive Board member Isabel Schnabel as inflation settles around 2%.

European stocks were slightly lower on Thursday as investors digest the U.S. Federal reserve's rate cut and commentary.

The European Central Bank proposed to simplify bank regulation on Thursday, looking to prune a complex rulebook without easing the overall financial burdens, prompting criticism from lenders hoping for greater relief.

European shares inched higher on Tuesday on the back of gains in financial and industrial stocks, while investor caution ahead of the U.S. Federal Reserve's two-day policy meeting later in the day

The pan-European Stoxx 600 ( STOXX) traded 0.07% lower at 578.4, mirroring a general cautious sentiment ahead of the US Federal Reserve's interest rate decision on Wednesday. The Fed is widely expected to deliver a 25-bps cut, though attention will center on projections amid persistent uncertainty over its 2026 policy path.

And if the Fed keeps cutting rates while other central banks don’t? Rogoff said investment will flow to the highest bidder. “Capital markets are global. So, the money’s going to move to where the rate of return looks good,” he said. The European Central Bank is likely to hold rates steady going forward.

European bank stocks posted their strongest year on record in 2025, fuelled by resilient growth, high margins, and capital returns. Looking to 2026, the focus is now shifting to earnings growth, efficiency gains,

The European Central Bank (ECB) outlined plans to simplify bank regulation and capital rules on Thursday, but is sticking to its pledge not to ease overall capital reserve requirements.