ECB maintains interest rates amid geopolitical uncertainty

The Governing Council of the European Central Bank (ECB) decided today to keep the three key interest rates unchanged: the deposit facility rate at 2.00%, the main refinancing operations rate at 2.15%, and the marginal lending facility rate at 2.40%.

The decision aims to ensure inflation stabilizes at the 2% target in the medium term. The outlook has become more uncertain due to the war in the Middle East, which increases upside risks for inflation and downside risks for economic growth. Higher energy prices are expected to influence near-term inflation, with medium-term effects depending on the conflict’s duration and intensity.

The ECB’s staff projections, updated with data up to 11 March, forecast average inflation of 2.6% in 2026, 2.0% in 2027, and 2.1% in 2028, with higher inflation projections than December due to increased energy prices. Excluding energy and food, inflation is projected at 2.3% in 2026, 2.2% in 2027, and 2.1% in 2028. Economic growth is expected to average 0.9% in 2026, 1.3% in 2027, and 1.4% in 2028, reflecting the global impact of the conflict on markets, incomes, and confidence.

The ECB has assessed alternative scenarios, indicating that prolonged energy disruptions could lead to higher inflation and lower growth. The medium-term outlook depends on the magnitude of indirect effects from energy shocks.

The Governing Council will continue to follow a data-dependent approach, making interest rate decisions based on inflation outlook, economic data, and monetary policy transmission. It is not committed to a specific rate path.

The asset purchase programmes (APP and PEPP) are decreasing at a predictable pace, as the Eurosystem no longer reinvests principal payments from maturing securities.

The ECB stands ready to adjust its instruments to ensure inflation stabilizes at 2% and to maintain effective monetary policy transmission. The Transmission Protection Instrument remains available to counter disorderly market dynamics that threaten price stability.

The ECB President will hold a press conference at 14:45 CET to discuss these decisions.