ECB Holds Key Rates Steady as Energy Prices Continue to Rise

The Governing Council of the European Central Bank decided on 29 oktober 2026 to keep the three key ECB interest rates unchanged, holding the deposit facility rate at 2.50%, the rate on the main refinancing operations at 2.65% and the marginal lending facility rate at 2.90%, according to the ECB’s monetary policy decisions statement. The Governing Council said it is committed to setting monetary policy to ensure that inflation stabilises at its 2% target in the medium term.

The decision came on the second day of the Governing Council’s monetary policy meeting in Frankfurt. The ECB’s published meeting schedule lists 29 oktober 2026 as Day 2 of the meeting, followed by a press conference. The decision statement said the President of the ECB would comment on the considerations underlying the decisions at a press conference starting at 14:45 CET on 29 oktober 2026.

Energy Prices, Wages and Financing Conditions

The ECB stated that energy prices have continued to rise, posing upside risks to the inflation outlook and downside risks to the growth outlook. While the full effects of the energy shock are still unfolding, underlying inflation has remained broadly stable so far and wages do not show a material response at this stage, the statement said. The Governing Council assessed that the increased magnitude and duration of the energy shock, together with the implications for indirect and second-round effects, are likely to drive up inflation and lower growth. Financing conditions have tightened since the Governing Council’s last meeting, which the ECB said is likely to weigh on inflation and growth.

The Governing Council said it remains well positioned to navigate the current elevated uncertainty. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance, with interest rate decisions based on its assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is “not pre-committing to a particular rate path,” the statement said.

On the balance sheet, the asset purchase programme and pandemic emergency purchase programme portfolios are declining at a “measured and predictable pace,” as the Eurosystem no longer reinvests the principal payments from maturing securities, according to the statement.

The Governing Council also restated that it stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises at its 2% target in the medium term and to preserve the smooth functioning of monetary policy transmission. The Transmission Protection Instrument is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries, the statement said, allowing the Governing Council to more effectively deliver on its price stability mandate.

Earlier 2026 Decisions and the Next Meeting

On 23 juli 2026, the Governing Council kept the three key rates unchanged, leaving the deposit facility, main refinancing operations and marginal lending facility rates at 2.25%, 2.40% and 2.65% respectively. The ECB’s July statement said the outlook for energy prices, while highly volatile, stood close to the baseline of the June Eurosystem staff projections and well above the levels recorded prior to the conflict in the Middle East. It added that uncertainty remained high, that the full inflationary impact of the energy shock had yet to play out, and that the Council was closely monitoring the intensity and duration of the shock as well as its indirect and second-round effects.

On 10 september 2026, the Governing Council raised the three key rates by 25 basis points, increasing the deposit facility, main refinancing operations and marginal lending facility rates to 2.50%, 2.65% and 2.90% respectively, with effect from 16 september 2026. The ECB’s September decision statement said the conflict in the Middle East continued to generate inflation pressures and that inflation was set to remain well above target for an extended period.

New ECB staff projections accompanied the September decision. Their baseline saw headline inflation averaging 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, and inflation excluding energy and food at 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. Compared with June, the baseline projection for inflation in 2026 was unchanged, while the projections for 2027 and 2028 were revised up. The baseline projection for economic growth was 0.9% for 2026, 1.4% for 2027 and 1.5% for 2028, an upward revision for both 2026 and 2027 that the statement attributed mainly to the greater than expected resilience of the euro area economy. The September statement said updated staff scenarios illustrated the broad range of outcomes for growth and inflation under different assumptions about the energy shock’s intensity and duration and its indirect and second-round effects.

The ECB’s published calendar lists a non-monetary policy meeting of the Governing Council in Frankfurt on 25 november 2026. The next monetary policy meeting is scheduled for 16-17 december 2026 in Frankfurt, with the Day 2 session on 17 december 2026 followed by a press conference.