No sharp turns or unexpected announcements: interest rates in Europe remain intactas the ECB announced this afternoon at its meeting. In the midst of an international scene shaken by the rise in energy prices after the conflict in Iran, the decision conveys a clear idea: this is not the time to react hastily. Inflation remains under surveillance, but the origin of the tensions—volatile and conditioned by geopolitical factors—invites caution. Moving rates now would be, more than a solution, a gesture with little real impact on the immediate course of events.
This imposes a Deliberate, almost strategic pause. Monetary policy chooses to resist, observe and buy time while the scope of inflationary pressures becomes clearer. The message is firm but contained: the door to future adjustments is not closed, but it is not forced either. In this balance between prudence and determination, the ECB draws a roadmap in which patience outweighs urgency, aware that hasty decisions can have a greater cost than waiting.
Greater uncertainty due to the Iran conflict
In this way, and as indicated in its statement today, the Governing Council of the ECB has decided today keep the ECB’s three official interest rates unchanged and is determined to ensure that inflation stabilizes at the 2% objective in the medium term.
Specifically, the The interest rates applicable to the deposit facility, the main financing operations and the marginal credit facility will remain unchanged at 2.00%, 2.15% and 2.40%, respectively.
The War in the Middle East has created upside risks to inflation and downside risks to economic growth, making the outlook much more uncertain. The war will have a significant impact on short-term inflation due to rising energy prices. Its medium-term implications will depend both on the intensity and duration of the conflict, and on the way in which energy prices affect consumer prices and the economy.
The Governing Council is in a good position to navigate this uncertainty. Inflation has been around the 2% target, longer-term inflation expectations are firmly anchored and the economy has shown resilience in recent quarters. The information obtained from now on will allow the Governing Council to evaluate the effects of the war on inflation prospects and the risks to which they are subject. He The Governing Council is closely monitoring the situation and its data-driven approach will help it define monetary policy appropriately.
Inflation forecasts on the rise and economic growth on the decline
The new projections by the ECB experts exceptionally incorporate the information obtained until March 11, a later closing date than usual. In the reference scenario it is estimated that the General inflation will average 2.6% in 2026, 2.0% in 2027 and 2.1% in 2028. The Inflation has been revised upwards compared to December projections, especially for 2026, due to the rise in energy prices as a result of the war in the Middle East.
Experts also expect inflation excluding energy and food to average 2.3% in 2026, 2.2% in 2027 and 2.1% in 2028. This path is also higher than the December projections and mainly reflects the pass-through of higher energy prices to inflation excluding energy and food.
Experts predict that the Economic growth will be, on average, 0.9% in 2026, 1.3% in 2027 and 1.4% in 2028, which implies a downward revision, especially for 2026due to the effects of the war on raw materials markets, real incomes and confidence around the world. At the same time, low unemployment, strong private sector balance sheets, and public spending on defense and infrastructure should continue to support growth.
In line with the commitment reflected in the Governing Council’s monetary policy strategy to incorporate risks and uncertainty into decision-making, experts have also analyzed how the war in the Middle East could affect economic growth and inflation in illustrative alternative scenarios. These scenarios will be published with the experts’ projections on the ECB website. Scenario analysis indicates that a prolonged oil and gas supply disruption would raise inflation above, and reduce growth below, the baseline scenario projections. The implications for inflation in the medium term essentially depend on the magnitude of the indirect and second-round effects of a stronger and more persistent energy shock.
The Governing Council will apply a data-driven approach, where decisions are taken at each meeting, to determine the appropriate direction of monetary policy. In particular, its interest rate decisions will be based on its assessment of the inflation outlook and the risks to which it is subject, taking into account new economic and financial data, the dynamics of underlying inflation and the intensity of monetary policy transmission. The Governing Council does not commit in advance to any specific rate path.
Asset Purchase Program (APP) and Pandemic Emergency Purchase Program (PEPP)
The size of the APP and PEPP portfolios is declining at a measured and predictable pace, as the Eurosystem has stopped reinvesting the principal of maturing securities.
The Governing Council is prepared to adjust all its instruments within the framework of its mandate to ensure that inflation stabilizes at its target of 2% in the medium term and preserve the smooth functioning of monetary policy transmission. Furthermore, the Transmission Protection Instrument is available to counter unwanted or disorderly market dynamics that constitute a serious threat to the transmission of monetary policy in euro area countries, allowing the Governing Council to more effectively fulfill its price stability mandate.
The President of the ECB will comment on these decisions at a press conference that will begin this afternoon at 2:45 p.m. (Central European Time).