ECB holds interest rates steady as inflation nears 2% target

The European Central Bank (ECB) has opted to keep its three key interest rates unchanged, as inflation continues to hover close to its medium-term target of two per cent.

Following its latest Governing Council meeting, the ECB confirmed that the rate on the main refinancing operations remains at 2.15 per cent, while the deposit facility and marginal lending facility rates stand at two per cent and 2.40 per cent, respectively.

The central bank said that its overall assessment of the inflation outlook remains largely unchanged, with price growth showing signs of stabilisation after a prolonged period of volatility. The euro area economy has continued to expand despite global headwinds, supported by a strong labour market, solid private sector finances, and the effect of earlier interest rate cuts.

However, the ECB acknowledged that uncertainty persists, particularly due to ongoing trade disputes and geopolitical tensions, which could weigh on growth and investment sentiment.

Looking ahead, the Governing Council reiterated its commitment to ensuring inflation remains anchored at two per cent over the medium term. It emphasised that future monetary policy decisions will be guided by incoming data and an ongoing assessment of risks, stressing that it is not pre-committing to any specific rate path.

Meanwhile, the ECB’s Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios are continuing to decline as the Eurosystem no longer reinvests proceeds from maturing securities, marking a gradual unwinding of its balance sheet.