Key Takeaways
- As widely expected, the ECB held interest rates steady for a fifth consecutive meeting.
- A majority of forecasters expect stable rates over the remainder of 2026.
- Inflation in the eurozone is seen as under control, but downside risks have emerged amid the stronger euro as January inflation dips to 1.7% year over year.
The European Central Bank kept its key interest rate steady at 2% on Thursday, as widely anticipated. The decision marks the fifth consecutive pause in the rate-cutting cycle that began in June 2024.
“Its updated assessment reconfirms that inflation should stabilise at its 2% target in the medium term,” the bank said in the press release, reiterating its previous wording. “The economy remains resilient in a challenging global environment. Low unemployment, solid private sector balance sheets, the gradual rollout of public spending on defence and infrastructure and the supportive effects of the past interest rate cuts are underpinning growth.”
The central bank gave no forward guidance on interest rates.
“With interest rates already low at 2% and inflation hovering at or around the European Central Bank’s targeted 2% level, the bank is in no rush to alter rates,” says Michael Field, Morningstar’s chief European market strategist.
ECB Rate Decision for February 2026
- Deposit rate: 2.00% (unchanged)
- Main refinancing rate: 2.15%
- Marginal lending facility: 2.40%
- Inflation: 1.7% (January, YoY)
- Next meeting: March 19, 2026
The decision comes a day after January’s surprisingly low eurozone inflation figures were released by Eurostat. Consumer prices in the eurozone increased by 1.7% year over year in January, according to Eurostat’s flash estimate, down from December’s reading of 1.9% and significantly below consensus forecasts of a 2.0% rise.
The stronger euro, which reached its highest level against the US dollar since 2021 in January, makes imports cheaper for buyers in the eurozone, adding downward pressure on inflation. At the same time, the stronger common currency could pose a headwind for eurozone exporters just as the region’s economy shows tentative signs of recovery.
The Bank of England also kept rates unchanged on Thursday.
ECB staff last revised their economic forecasts in December 2025. They see headline inflation averaging:
- 2.1% in 2025 (the same as in its September forecast)
- 1.9% in 2026 (up from 1.7%)
- 1.8% in 2027 (down from 1.9%)
- 2.0% in 2028 (a new forecast)
The next inflation and growth forecasts will be published on March 19.
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%
Will the ECB Cut Rates in March?
The strength of the euro against the US dollar slightly increases the risk of inflation falling below the 2% target during the year, says Felix Schmidt, economist at Berenberg Bank. “If the euro continues to appreciate until the ECB meeting on 19 March, when the new forecasts will be presented, the ECB will ultimately have to lower its inflation forecast from December, which at 1.9% for 2026 and 1.8% for 2027 is already below the target of 2%. This would make another rate cut more likely,” he says.
According to Felix Feather, economist at Aberdeen Investments, ECB President Christine Lagarde has previously signalled tolerance for a strong euro. “We expect them to reinforce this view and oppose recent movements in the swap markets, which are pricing in a possible interest rate cut by the ECB in response to the strength of the euro. We expect the ECB to leave its key interest rate unchanged throughout the year,” he said ahead of the meeting.
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,” Held says.
How Do Rate Cuts Affect Investors?
Equity markets tend to rise on anticipated rate cuts. In bond markets, falling interest rates mean lower yields, which pushes bond prices higher. Lower rates also make existing bonds, particularly those already issued during a period of high rates, more attractive on yields.
Meanwhile, savings account rates will fall, which impacts cash savers. In contrast, borrowers benefit as consumer debt and mortgages become cheaper.
When Are the ECB Meetings in 2026?
- March 19, 2026
- April 30, 2026
- June 11, 2026
- July 23, 2026
- Sept. 10, 2026
- Oct. 29, 2026
- Dec. 17, 2026
