- Decision
- Maintain
- Rate change
- 0 bps
- deposit facility rate
- 2.25%
The European Central Bank’s Governing Council kept the deposit facility, main refinancing operations and marginal lending facility unchanged at 2.25%, 2.40% and 2.65% on 23 July 2026, saying energy prices remain highly volatile, the outlook is close to the June Eurosystem staff baseline, and the full inflationary impact of the energy shock linked to the conflict in the Middle East has yet to play out, requiring policy to stay focused on bringing inflation back to the 2% medium-term target. After holding rates at 2.00%, 2.15% and 2.40% in March and April, the ECB raised all three by 25 basis points in June. The ECB said financial conditions have become slightly tighter since the previous meeting. Recent information pointed to some improvement in second-quarter activity, with services partly recovering and manufacturing holding up, but forward-looking indicators still suggest modest near-term growth as the energy shock and related uncertainty weigh on demand. Headline inflation fell to 2.8% in June from 3.2% in May, while inflation excluding energy and food eased to 2.4%; the ECB said the rise in energy prices since the start of the conflict is likely to keep inflation well above target into the first half of 2027, although bank lending to firms rose 4.0% year on year in May. The Governing Council said risks to growth remain to the downside and risks to inflation to the upside, citing fragile geopolitics, possible renewed energy supply disruption and trade frictions, and reiterated that decisions will remain data-dependent, meeting by meeting and without pre-committing to any rate path, while standing ready to adjust all instruments within its mandate.
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.