ECB maintains interest rates and discusses economic outlook

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.

They congratulated Bulgaria on joining the euro area on 1 January 2026 and welcomed Bulgarian National Bank Governor Dimitar Radev to the Governing Council.

The ECB’s updated assessment confirms that inflation should stabilize at the 2% target in the medium term. The economy remains resilient, supported by low unemployment, private sector balance sheets, and public spending on defense and infrastructure. However, global trade policy uncertainty and geopolitical tensions pose risks.

The ECB will follow a data-dependent, meeting-by-meeting approach for monetary policy decisions, assessing inflation outlook and risks without pre-committing to a specific rate path. The decisions are detailed in a press release available on the ECB website.

Economic activity grew by 0.3% in the fourth quarter of 2025, driven mainly by services, with resilience in manufacturing and growth in construction. Unemployment was at 6.2% in December. Private consumption is supported by rising incomes and lower household savings, while government spending and business investment also contribute.

The Governing Council emphasized the importance of strengthening the euro area through sustainable public finances, strategic investments, structural reforms, and completing the banking and savings union. The digital euro regulation is also a priority.

Inflation declined to 1.7% in January from 2.0% in December. Energy prices fell sharply, while food prices increased. Underlying inflation measures remain close to the 2% target, supported by stable longer-term expectations and moderate wage growth.

Risks include global policy volatility, trade frictions, geopolitical tensions, and climate-related events. Positive factors include increased public spending, reforms, and technological adoption, which could boost growth.

Financial conditions showed lower market rates, with bank lending rates for firms at 3.6% in December. Credit demand increased slightly, but credit standards tightened. Mortgage lending remained steady at 3.3%.

The ECB remains committed to adjusting its instruments as needed to ensure inflation stabilizes at the target and to maintain effective monetary policy transmission. The Governing Council is prepared to respond to evolving economic conditions.

The press conference concluded with an invitation for questions.