Key facts
- The European Central Bank kept its key interest rates unchanged.
- The deposit rate remains at 2.25%.
- The ECB aims to assess the impact of renewed Middle East conflict on inflation.
- In June 2026, the ECB had raised rates by 25 basis points.
- Headline inflation is projected to average 3.0% in 2026 and 2.0% by 2028.
The European Central Bank has decided to keep its key interest rates steady, maintaining the deposit rate at 2.25%. This pause allows the bank to evaluate the economic consequences of escalating conflict in the Middle East and to assess incoming data before considering further monetary tightening. Officials previously raised rates by 25 basis points in June 2026 to combat inflation.
In a July 2025 press conference, ECB President Christine Lagarde and Vice-President Luis de Guindos announced the Governing Council's decision to hold rates, citing inflation stabilizing at the 2% medium-term target and moderating domestic price pressures. The economy showed resilience in the first quarter, with unemployment at 6.3% in May, supported by consumption and investment. However, geopolitical uncertainty and trade disputes are creating hesitancy among firms.
Annual inflation was 2.0% in June, with food price inflation easing to 3.1%, goods inflation at 0.5%, and services inflation at 3.3%. Underlying indicators align with the target, and labor costs are moderating. The ECB's baseline projection forecasts headline inflation to average 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028, with core inflation projected at 2.5% and 2.2% for the respective years. Economic growth is forecast at 0.8% in 2026, rising to 1.2% in 2027 and 1.5% in 2028.