- 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 at 2.00%, 2.15% and 2.40% respectively, judging that while the overall inflation outlook remains broadly in line with earlier assessments, the Middle East war’s surge in energy prices has heightened upside risks to inflation and intensified downside risks to growth, warranting no immediate policy change. After four 25 bp cuts between January and June 2025 that lowered the deposit rate to 2.00%, the stance has been on hold, including at the 19 March meeting. The ECB confirmed that APP and PEPP portfolios will keep shrinking as maturing proceeds are no longer reinvested. Headline inflation had been hovering around the 2% target and long-term expectations stay anchored, but shorter-term expectations have risen markedly; the economy had proved resilient in recent quarters, yet sentiment is deteriorating. The Council will continue a data-dependent, meeting-by-meeting approach and reiterated its readiness to adjust all instruments, with the Transmission Protection Instrument available to counter unwarranted market stress.
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.