Key Takeaways
- The ECB is widely expected to hold interest rates steady on Feb. 5 for a fifth consecutive meeting.
- A majority of forecasters expect steady rates over the remainder of 2026.
- Inflation in the eurozone is seen as under control, but downside risks have emerged amid the stronger euro.
The European Central Bank is expected to hold interest rates steady on Feb. 5, marking the fifth consecutive meeting without a cut since the central bank lowered rates by 0.25 percentage points in June 2025.
“With interest rates already low at 2% and inflation hovering at or around the ECB’s targeted 2% level, the bank is in no rush to alter rates,” says Michael Field, Morningstar’s chief European markets strategist. “This message has been well understood by economists, 85% of whom, in a recent poll, suggested February’s announcement will be a firm hold.”
“The majority of economists actually believe rates will remain at this level for the entirety of next year, a bold prediction in the face of such an uncertain economic environment. That said, rates are low and from here the ECB has plenty of room for manoeuvre to adapt to changing market conditions,” Field adds.
Swap markets are also pricing in no change in ECB policy at the Feb. 5 meeting and signal little appetite for rate cuts in 2026, with overnight index swaps dipping by only around 10 basis points over the fall before rates are expected to tick back up toward current levels by year-end.
What Are the Key ECB Interest Rates?
The first ECB rate cut came in June 2024 and a total of eight rate cuts have taken the deposit facility rate from 4.00% to the current level of 2.00%. Since June 11, 2025, the ECB’s three policy rates stand at:
- Deposit Facility Rate: 2.00%
- Main Refinancing Rate: 2.15%
- Marginal Lending Facility: 2.40%
Stronger Euro to Revive Rate Cut Debate in 2026
“Topics at the ECB meeting are likely to include trade policy uncertainty, the renewed appreciation of the euro and the expected significant decline in the inflation rate in January to below the 2% mark,” says Ulrike Kastens, economist for Europe at DWS.
Inflation data for the eurozone are due on Feb. 4, just a day before the ECB governing council meeting. Consensus calls for a headline inflation rate of 2.0% year on year, but the Frankfurt-based asset manager expects a reading of just 1.7%.
A strong euro against the US dollar makes imports cheaper for buyers in the eurozone, thus weighing on inflation. The euro currently trades near USD 1.19, up from 1.17 in early January.
“The euro already gained 7.6% on a trade-weighted basis last year; this has already been factored into the ECB’s projections for growth and inflation. In this respect, there is no reason for a rapid adjustment of monetary policy despite the recent strength of the euro,” Kastens adds.
But the stronger euro could revive the debate on a possible rate cut, says Carsten Brzeski, head of global macroeconomics research at ING. “For now and for next week, the stronger euro is a complicating factor for the cyclical turnaround in industry, which is just materialising, and for the growth outlook in general. The recent appreciation will not be a big enough concern for the ECB to change course next week,” he says.
Will the ECB Cut Rates in March?
For now, the central bank will stay in a “good place”, and Brzeski does not expect ECB president Christine Lagarde to say anything more on the exchange rate, beyond noting that the ECB will monitor it closely.
“However, if the latest trend continues and if the ECB wants to send a signal that a slight undershoot of inflation is as much a concern as a slight overshoot, the chances of a rate cut in March would clearly increase,” he adds.
Joerg Held, head of portfolio management at Ethenea Independent Investors, says: “We see one necessary and a maximum of two possible easing steps in 2026, but not in the short term and only if absolutely needed.”
“‘We import deflation via the strong euro. The ECB is keeping a very close eye on this, but we are still a long way from the point at which it would need to take countermeasures,” he says.
A euro at even USD 1.25 would not be an unusually high level historically, according to Held. “It only becomes problematic when we lose competitiveness due to the strong currency. This is because an overly strong euro has a dampening effect - especially for Germany, with growth of only 0.8% to 0.9% forecast for 2026 by the IFO Institute and economic experts.’
Is the Eurozone Economy Gaining Steam in 2026?
The eurozone has shown tentative signs of improvement toward the end of 2025, fresh GDP data show. “Despite the tariff dispute with the US and growing competition from China, the eurozone has shown resilience,” according to Berenberg Economics. GDP grew by 0.3% quarter over quarter in the fourth quarter of 2025, exceeding the Bloomberg consensus forecast of 0.2%.
However, there is a wide dispersion in growth. While the Spanish and Portuguese economies grew 0.8% quarter over quarter, France’s and Germany’s growth rates were only 0.2% and 0.3%, respectively.
“Despite only limited progress on Europe’s structural challenges, the economy appears to be entering a cyclical upswing,” says Peter Vanden Haute, chief economist for the eurozone at ING. The services sector continues to expand, while manufacturing is slowly emerging from its slump.
DWS’s Kastens says that sentiment indicators such as the purchasing managers’ index remain above the 50-mark, and labour markets are also stable. “The ECB’s interest rate cuts are likely to give the construction industry a new boost this year. In addition, Germany is significantly increasing its public investment. The economic environment would therefore have to change significantly before the ECB abandons its assessment that ‘we are in a good place’.”
When Are the ECB Meetings in 2026?
- Feb. 5, 2026
- March 19, 2026
- April 30, 2026
- June 11, 2026
- July 23, 2026
- Sept. 10, 2026
- Oct. 29, 2026
- Dec. 17, 2026
