- Decision
- Maintain
- Rate change
- 0 bps
- deposit facility rate
- 2%
The European Central Bank’s Governing Council kept the deposit facility, main refinancing and marginal lending rates unchanged at 2.00 %, 2.15 % and 2.40 % respectively, arguing that headline HICP inflation is at the 2 % medium-term target, underlying price pressures and wage growth are easing, and first-quarter GDP surprised on the upside with a 0.6 % expansion even as trade-related uncertainty clouds the outlook. After four consecutive 25 bp cuts between January and June that trimmed the deposit rate by a cumulative 100 bp, the Council reaffirmed its data-dependent, meeting-by-meeting approach and declined to pre-commit to any future path. It noted that past easing continues to filter through: average interest rates on new corporate loans fell to 3.7 % in May (from 3.8 % in April), mortgage rates held at 3.3 %, and mortgage lending growth edged up to 2.0 % while loan growth to firms slowed to 2.5 %. Inflation details for June showed food prices up 3.1 %, goods prices rising 0.5 % and services up 3.3 %, with compensation-per-employee growth moderating to 3.8 %. A stronger euro, potential tariff escalations and broader geopolitical tensions pose downside risks to growth and inflation, though resolution of trade disputes or higher public investment could lift activity. The central bank reiterated its readiness to adjust all instruments to keep inflation anchored at 2 % and stressed that no direction for future rate moves is pre-determined.
Rate evolution
From June 2025 to April 2026, the European Central Bank cut the deposit facility rate by 25 basis points to 2.00% in June and then held it unchanged, with the easing based on a better inflation outlook, moderating underlying inflation and wage growth, and effective monetary transmission, as inflation was around target and worries that trade tensions would tighten financing conditions had eased. Later holds reflected inflation staying at or near 2%, easing domestic price pressures and labour costs, anchored longer-term inflation expectations, and an economy that remained resilient thanks to the labour market, solid private sector balance sheets, easier financing conditions and, by December, stronger domestic demand, even as trade disputes, geopolitics and the stronger euro kept uncertainty elevated.
In subsequent decisions, the Governing Council again left rates unchanged but warned that the war in the Middle East had sharply raised energy prices, intensifying upside risks to inflation and downside risks to growth, before raising the three key ECB interest rates by 25 basis points on 11 June 2026, lifting the deposit facility rate to 2.25% as it judged that the war was generating inflation pressures. On 23 July 2026, it held the deposit facility rate at 2.25% and said energy prices remained highly volatile and well above pre-conflict levels, uncertainty was high and the full inflationary impact of the shock had yet to play out, while reiterating its data-dependent, meeting-by-meeting approach with no pre-committed rate path. On 10 September 2026, the Governing Council raised the three key ECB interest rates by a further 25 basis points, taking the deposit facility rate to 2.50% with effect from 16 September, as the conflict continued to generate inflation pressures and inflation was set to remain well above target for an extended period. New European Central Bank staff projections put headline inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, with the 2027 and 2028 forecasts revised up from June, while the Governing Council said risks remained tilted to the upside for inflation and to the downside for growth and retained its data-dependent, meeting-by-meeting approach.