ECB keeps key interest rates unchanged as inflation outlook steadies

The European Central Bank today left its three key interest rates unchanged, as its latest assessment indicated that inflation is expected to stabilise at the 2 per cent medium-term target.

Following a meeting of the Governing Council, the ECB confirmed that the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will remain at 2 per cent, 2.15 per cent and 2.40 per cent respectively.

The central bank said the euro area economy continues to show resilience in a challenging global environment. Low unemployment, solid private sector balance sheets, the gradual rollout of public spending on defence and infrastructure, and the supportive effects of past interest rate cuts are all underpinning growth.

However, the ECB cautioned that the outlook remains uncertain, particularly due to ongoing global trade policy uncertainty and geopolitical tensions.

The Governing Council reiterated its commitment to ensuring that inflation stabilises at the 2 per cent target over the medium term. It confirmed that future interest rate decisions will continue to be guided by a data-dependent and meeting-by-meeting approach, based on incoming economic and financial data, underlying inflation trends and the strength of monetary policy transmission.

The ECB also confirmed that it is not pre-committing to any particular future rate path.

On its balance sheet policy, the central bank said the portfolios under the Asset Purchase Programme (APP) and the Pandemic Emergency Purchase Programme (PEPP) continue to decline at a measured and predictable pace, as the Eurosystem no longer reinvests principal payments from maturing securities.