The European Central Bank’s (ECB) Governing Council announced on Thursday that it has maintained its key interest rates, citing persistent inflationary pressures across the euro area, partly attributed to the middle East conflict. The rates for the deposit facility, main refinancing operations, and marginal lending facility were kept steady at 2.0%, 2.15%, and 2.40%, respectively. This marks the second consecutive period of no change, as the ECB last adjusted these levels in June 2025.
The ECB acknowledged that the conflict in the middle East has caused a sharp escalation in energy costs, contributing to inflation and dampening economic sentiment. The bank stated that the medium-term impact of the war on inflation and economic activity hinges on the persistence and intensity of the energy price shock and its secondary effects. Continued conflict and elevated energy prices are expected to exert a stronger influence on overall inflation and the economy.
Despite the current uncertainty, the Governing Council expressed confidence in its ability to manage the economic environment. While the euro area entered the period with inflation near the 2% target, recent quarters have shown economic resilience, and longer-term inflation expectations remain anchored. However, short-term expectations have risen considerably.
The ECB confirmed that its monetary policy decisions will adhere to a data-dependent, meeting-by-meeting approach. Future adjustments to interest rates will depend on the assessment of the inflation outlook, associated risks, and incoming economic and financial data. The Council made no pre-commitments regarding a specific path for future rates.
This decision aligned with market forecasts, though analysts anticipate potential adjustments at the June meeting given the ongoing impact of the middle East conflict on inflation dynamics. Preliminary Eurostat data projected annual inflation to rise to 3.0% in April.
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