- Decision
- Maintain
- Rate change
- 0 bps
- deposit facility rate
- 2%
The European Central Bank’s Governing Council left the deposit facility, main refinancing and marginal lending rates unchanged at 2.00%, 2.15% and 2.40% respectively, judging that existing settings remain consistent with its aim of stabilising inflation at the 2% medium-term target while it gauges the impact of the Middle East war, which it warns creates upside risks to inflation via higher energy prices and downside risks to growth. The policy stance has been steady since the 25-basis-point rate cut delivered in June 2025. The operating framework is unchanged: the deposit rate remains the key policy instrument and the APP and PEPP portfolios continue to run off as reinvestments have ceased. Staff now project headline inflation at 2.6% in 2026, before easing to 2.0% in 2027 and 2.1% in 2028; core inflation is seen at 2.3%, 2.2% and 2.1% over the same years. Real GDP growth has been revised down to 0.9% for 2026 but is expected to firm to 1.4% by 2028, with low unemployment, solid private balance sheets and higher defence and infrastructure spending providing support. The Council reiterates that policy decisions will remain data-dependent and taken meeting by meeting, with no pre-set rate path and full readiness to adjust all instruments, including the Transmission Protection Instrument, to safeguard price stability and transmission.
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.