European Central Bank monetary policy meeting summary for February 2026

The European Central Bank (ECB) Governing Council convened on 4-5 February 2026 in Frankfurt am Main to review recent financial, economic, and monetary developments. The meeting focused on assessing global and euro area growth, inflation prospects, and financial conditions.

Ms. Schnabel reported that since the December 2025 meeting, geopolitical and trade policy uncertainties had increased, but market volatility remained contained. Stock market volatility had edged up slightly, bond market volatility was stable, and investor risk appetite remained high, near levels seen since the 2008 financial crisis. Market reactions to US tariff threats had been limited, with investors hedging US dollar exposures and reallocating toward precious metals and euro assets. The euro appreciated by 1% against the US dollar since the last meeting, driven mainly by dollar weakness rather than euro strength.

Economic data showed resilience in the global economy and the euro area, with incoming macroeconomic indicators surprising on the upside. Euro area inflation fixings had been revised upward, mainly due to oil and metal prices, with inflation expected around 1.8% for the second half of 2026. Expectations for ECB policy rates remained low, with rates expected to stay unchanged in 2026 and possibly in 2027, while US rates were revised slightly upward.

Financial markets experienced temporary volatility in January due to trade and geopolitical tensions, but overall conditions remained stable. Euro area equities outperformed the S&P 500, supported by strong domestic demand and sector differentiation. Sovereign bond spreads narrowed, and spreads in corporate bonds reached record lows. The ECB’s Macro-Finance Financial Conditions Index indicated improved financial conditions driven by higher asset prices and lower real rates.

Money market reserves declined significantly since November 2022, with repo rates close to the deposit facility rate. As reserves become less ample, banks may adjust borrowing in money markets or refinancing operations, with limited use of standard refinancing so far.

In the euro area, economic growth in Q4 2025 was 0.3%, driven mainly by services and resilient manufacturing. Domestic demand was expected to support growth, supported by labor income and public investment, while external headwinds and tariffs weighed on exports. Unemployment was at 6.2%, with signs of labor market softening but still low overall.

Members agreed to keep the three key ECB interest rates unchanged, citing the resilience of the economy and inflation prospects aligned with the 2% target. The Council emphasized a data-dependent approach, maintaining optionality amid high uncertainty and risks, including trade tensions and geopolitical risks. Future communication would remain non-committal about rate paths, with close monitoring of inflation, wage growth, exchange rates, and financial conditions.

The Governing Council finalized the monetary policy statement, with the next account scheduled for release on 16 April 2026. The decision reflects a cautious stance to observe incoming data and risks while supporting economic resilience.