The Governing Council of the European Central Bank (ECB) announced on Thursday that it has maintained its key interest rates, citing the ongoing impact of the middle East conflict on the euro area’s economy. 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 represents the first time the interest rates have remained unchanged for nearly a year, as the ECB last adjusted them in June 2025.
The ECB noted that the conflict has caused a sharp increase in energy prices, which has subsequently fueled inflation and dampened overall economic sentiment. The central bank stated that the long-term effects of the war on inflation and economic activity will depend on the persistence and intensity of the energy price shock, as well as its secondary economic repercussions. Despite the current volatility, the ECB expressed confidence in its ability to manage the uncertainty.
It highlighted that the euro area began this period with inflation near the 2% target and has demonstrated recent economic resilience. While long-term inflation expectations remain stable, short-term expectations have increased substantially. The Governing Council affirmed its commitment to a data-dependent approach, stating that future decisions regarding interest rates will be based on a meeting-by-meeting assessment of the inflation outlook and associated risks.
The ECB cautioned against pre-committing to a specific path for rates. In line with market forecasts, the decision to hold rates steady was met by analysts, though some anticipate potential adjustments at the June meeting given the ongoing inflationary pressures stemming from the middle East situation. Preliminary data from Eurostat indicated an expected rise in annual inflation to 3.0% in April from 2.6% in March.
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