The European Central Bank left key interest rates unchanged, as markets expected, and gave no indications about its next move. Thus, the central bank reinforced expectations that monetary policy will remain stable for a longer period against the background of sustainable economic growth and inflation close to the target, reports "Reuters".
The ECB is on hold after ending a year-long cycle of interest rate cuts in June. The combination of surprisingly robust economic activity and easing inflationary pressures has virtually eliminated the need for additional support, analysts say.
In its official statement, the central bank said that "the economy remains resilient in a challenging global environment", but warned that the outlook remains uncertain due to "continued uncertainty around global trade policy and geopolitical tensions". According to the ECB, the updated assessment confirms the expectation that inflation will stabilize around the 2% target in the medium term.
Inflation in the euro area fell to 1.7% in January due to lower energy prices and may fall even before the expected recovery next year. At the same time, recent movements in the foreign exchange market are not seen as a decisive factor, with the ECB maintaining its position that the exchange rate is only one element in the inflation assessment, not a goal in itself.
Economic data remains encouraging - growth is stable, unemployment is at a historically low level, and wages are rising. Despite weak exports and problems in industry, domestic consumption is compensating, helped by high savings and a strong labor market. A further boost is expected from Germany's planned budget spending on defence and infrastructure.
According to an analysis by Deutsche Bank, the direction of monetary policy in 2026 will depend on the balance between external and domestic factors, with the baseline scenario foreseeing a possible tightening of policy in 2027. However, risks remain two-sided and if inflation remains persistently below target, the ECB may be forced to provide support again.
At the press conference after the meeting, ECB President Christine Lagarde said that policy was "in a good place" and that inflation was also "in a good place", making it clear that even discussing a change in the near future was not on the agenda. The bank reiterated that it would follow a data-dependent and meeting-by-meeting approach and that its primary objective remained to stabilise inflation around 2% over the medium term. At the same time, Lagarde stressed that the outlook remains more uncertain than usual due to global trade policy and geopolitical tensions.
The exchange rate was discussed by the Governing Council, but Lagarde reminded that the ECB does not target the exchange rate. According to her, the euro has appreciated against the dollar since spring 2025, and the effect of this appreciation is already included in the baseline scenario of the forecasts, as the institution continues to monitor whether and how this effect is transmitted to prices. She acknowledged that a stronger euro could push inflation below current expectations, especially if combined with more volatile and cautious financial markets, but added that the recent movements in the dollar do not change the overall assessment.
Lagarde described the risks to inflation as "broadly balanced", noting that some factors have strengthened while others have weakened. She cited persistently rising energy prices, more fragmented global supply chains and a slower cooling of wage growth as possible reasons for higher inflation, as well as planned increased spending on defense and infrastructure. At the same time, lower inflation could materialize if tariffs curb demand for eurozone exports, if countries with excess capacity increase their supplies to the bloc, if the euro appreciates further or if market volatility weakens demand.
On domestic price developments, Lagarde said that core inflation indicators have changed little in recent months and remain consistent with the 2% target, and most measures of longer-term inflation expectations are stable around this level. Negotiated wage growth is slowing, but uncertainty is being created by payments outside collective agreements. Economic growth in the euro area is mainly driven by the services sector, especially information and communications technology, with manufacturing remaining resilient despite trade and geopolitical headwinds, and construction starting to gain momentum. Lagarde added that business investment is likely to strengthen, although the external environment remains challenging due to tariffs and a stronger euro.
The ECB President also commented on Donald Trump's nomination of Kevin Warsh as Federal Reserve Chairman, saying that she had known him for a long time and welcomed the decision. Markets interpreted the overall tone as confirmation that rates will remain unchanged in 2026, with possible adjustments expected more recently in 2027 if the economy's internal resilience outweighs external risks.