The European Central Bank (ECB) has decided to extend its rate pause once again, keeping the key policy rate at 2.0 %.
This announcement was made following the ECB’s Governing Council meeting in Frankfurt.
Accordingly, the deposit facility rate remains unchanged at 2.00 %, the main refinancing operations rate at 2.15 %, and the marginal lending facility rate at 2.40 %.
The Governing Council said that it remains committed to ensuring that inflation stabilises around the 2 % target over the medium term.
The war in the Middle East, however, has introduced considerably more uncertainty. It raises the upside risk for inflation and the downside risk for economic growth. In the short run, higher energy prices driven by the conflict will have a substantial impact on inflation, while the medium‑term effects will hinge on the conflict’s intensity and duration and on how energy costs are transmitted to consumer prices and the broader economy.
Overall, the Governing Council feels well‑equipped to manage this uncertainty. Inflation is close to the 2 % target, medium‑term inflation expectations are firmly anchored, and the economy has shown resilience in recent quarters. New data coming in the near future will help assess the war’s impact on inflation outlooks and associated risks. The Council will closely monitor the situation, and its data‑driven approach will guide policy decisions.
The ECB’s new projections, prepared by its analysts, notably include information up to 11 March, a later deadline than usual. In the baseline scenario, average inflation is expected to be 2.6 % in 2026, 2.0 % in 2027, and 2.1 % in 2028. These figures represent an upward revision from the December forecasts, particularly for 2026, largely due to higher energy prices stemming from the Middle‑East conflict.
Core inflation, which excludes energy and food, is projected at 2.3 % in 2026, 2.2 % in 2027, and 2.1 % in 2028- also higher than the December estimates because the elevated energy costs feed into core prices.
Growth forecasts have been revised downward for 2026, predicting 0.9 % annual GDP growth, while 2027 and 2028 are forecast at 1.3 % and 1.4 %, respectively. This downgrade reflects the global spill‑over of the war on commodity markets, real incomes, and consumer confidence. At the same time, low unemployment, solid private‑sector balance sheets, and public spending on defence and infrastructure are expected to continue supporting growth.