The European Central Bank is all but certain to keep interest rates unchanged at its Governing Council meeting on July 24, 2026, opting for a breather after raising rates for the first time in years.
The decision to hold steady comes just weeks after the ECB hiked its three key rates by 25 basis points on June 11, marking the first increase since 2023 and ending a two-year easing cycle. The deposit facility rate now sits at 2.25%, with the main refinancing operations rate at 2.40% and the marginal lending facility at 2.65%.
Why the pause matters
The ECB’s June hike was unanimous among Governing Council members. ECB President Christine Lagarde and other policymakers have been careful to emphasize they are “not pre-committing to a particular rate path,” with September’s meeting set to be armed with updated staff projections that could justify another move higher.
Current inflation forecasts paint a picture of gradually cooling prices. The ECB projects headline inflation averaging 3.0% in 2026, declining to 2.3% in 2027, and finally hitting the 2.0% target by 2028. That 3.0% figure for this year is well above the ECB’s comfort zone, and much of the upward pressure traces back to energy costs fueled by geopolitical tensions surrounding Iran.
