The European Central Bank has kept its key interest rates unchanged, citing inflation targeting and economic resilience amid geopolitical uncertainties and rising energy prices.
Christine Lagarde, President of the ECB, and Luis de Guindos, Vice-President, announced that the Governing Council decided to keep the three key ECB interest rates unchanged. The decision reflects the aim to stabilize inflation at 2% in the medium term.
The outlook is now more uncertain due to the war in the Middle East, which has increased upside risks for inflation and downside risks for economic growth. The conflict is expected to impact near-term inflation through higher energy prices, with medium-term effects depending on the conflict’s duration and intensity.
Inflation has been around the 2% target, with long-term expectations well anchored. The ECB’s staff projections, updated up to 11 March, forecast inflation averaging 2.6% in 2026, 2.0% in 2027, and 2.1% in 2028, with revisions upward mainly due to higher energy prices. Economic growth is projected at 0.9% in 2026, 1.3% in 2027, and 1.4% in 2028, reflecting global effects of the war and supporting factors such as low unemployment and public spending.
The ECB assessed alternative scenarios, indicating that prolonged energy supply disruptions could lead to inflation above and growth below baseline projections. The Governing Council emphasized a data-dependent approach, with interest rate decisions based on inflation outlook and economic data, without pre-commitment to a specific rate path.
Recent economic activity showed a 0.2% growth in Q4 2025, driven by domestic demand, with increased household spending, investment, and services. The war’s disruption of commodity markets and confidence has led to downward revisions of consumption and investment forecasts, especially for 2026.
The ECB highlighted the importance of strengthening the euro area economy through sound public finances, targeted fiscal responses, and reducing dependence on fossil fuels. Initiatives such as the digital euro and harmonizing EU rules are seen as vital for strategic autonomy, competitiveness, and innovation.
Inflation rose to 1.9% in February, with energy prices 3.1% lower than a year ago. Inflation excluding energy and food increased to 2.4%. Underlying inflation indicators remain aligned with the 2% target, supported by wage growth and corporate profits. Risks to growth are tilted downward due to geopolitical tensions and energy shocks, while inflation risks are tilted upward if energy prices remain elevated longer.
Financial conditions have tightened, with stock markets declining and interest rates rising. Lending rates for firms and mortgages remained stable, while corporate bond issuance increased.
The Governing Council reaffirmed its commitment to a data-dependent approach, ready to adjust instruments to ensure inflation stabilizes at the target and to maintain effective monetary policy transmission. The decision is published in the official press release on the ECB website.
The ECB stands ready to respond to evolving economic and financial conditions to achieve its inflation target.
