Key Takeaways
- Markets expect no rate hike at the ECB’s April 30 meeting, as President Christine Lagarde says more information is needed before changing policy.
- Two rate hikes are now priced in for 2026 as higher energy costs are expected to feed through into headline and core inflation.
- Energy prices are expected to push inflation higher in the coming months, although the full impact will come with a lag.
Another rate hold appears the most likely outcome when the European Central Bank meets on April 30, even as rising oil and gas prices cloud the inflation outlook and complicate policymakers’ next steps.
Since the outbreak of the Iran war, energy prices have soared, prompting a sharp shift in market expectations. Markets that had leaned toward a possible rate cut prior to the energy shock are now pricing in two rate hikes by the end of 2026. Interest rate futures—derivative markets where investors trade expectations for future interest rates—currently imply two 0.25 percentage point increases this year, with the first expected in June.
ECB President Christine Lagarde has reinforced the prevailing wait-and-see consensus. In her April 20 speech in Berlin, she stressed that policymakers still need more clarity before adjusting rates, particularly regarding the duration of the energy shock and whether higher costs will feed into broader inflation. The key question, she said, is “which path we are on,” referring to the ECB’s three scenarios for energy prices, adding that the eurozone has not yet been pushed squarely into the more adverse of the three.
“A rate hold is the most likely near-term outcome as policymakers assess incoming data,” says Michael Field, Morningstar’s chief European markets strategist. “The environment has clearly changed, but the ECB still needs to determine whether this is a temporary energy price spike or something more persistent. If the rise in energy prices proves lasting, it would eventually require a policy response. The main risk lies in second-round effects, as companies begin to pass higher energy costs on to consumers.”
The ECB decision will come on the same day as the Bank of England’s next policy announcement, while Eurostat is scheduled to publish both flash estimates for first quarter GDP growth and April euro area inflation. Eurostat’s latest final data showed annual inflation at 2.6% in March, up from 1.9% in February.
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%
What to Expect From the April 30 ECB Meeting
“Markets will focus closely on the language of the policy statement,” adds Morningstar’s Field. A reiteration of the ECB’s data-dependent, meeting-by-meeting stance—and that it is closely monitoring developments—would likely reassure investors.
“But any indication that the ECB sees a more structural shift in the environment, and may need to act,would likely trigger a market reaction,” he says.
ING’s global head of macro, Carsten Brzeski now sees the ECB signaling at least one rate hike on Thursday. The bank is effectively “back in crisis mode,” shifting to a more reactive, data-driven approach, he says.
“The ECB shouldn’t be in any rush or panic to hike rates but will definitely want to come across as fully determined to act if needed,” he adds.
Martin Moryson, global head of economics at DWS, does not expect an interest rate hike at the meeting. “There is simply not enough new data to support such a move,” he says.
Will the ECB Raise Interest Rates in 2026?
Looking beyond April, rate hikes become likely, Moryson says. He believes two 0.25 percentage point hikes are possible. “The evidence is mounting that the ECB will need to respond if price pressures persist,” he says. “Further rate moves in 2026 will depend entirely on the data—oil prices, gas prices, inflation expectations, and core inflation. The ECB will not pre-commit. Its task now is above all to manage expectations and communicate clearly: vigilant, data-dependent, and ready to act.”
ING’s Brzeski also highlights a key contrast with 2022, when Russia’s full-scale invasion of Ukraine also pushed energy prices and inflation higher: Consumers are now far less willing to spend, which should limit the inflationary impact of higher energy prices, but could weigh more heavily on growth. Sentiment indicators already suggest weakening economic momentum.
Currency dynamics also differ. In 2022, a sharp depreciation of the euro amplified imported inflation. Today, a stronger euro provides at least some cushion for European consumers, Brzeski says.
Neuberger Berman expects the ECB to keep rates unchanged in April and guide markets toward the data ahead of June, including realized inflation, wages and commodity prices. A rate hike could become possible if core inflation stabilizes around 2.5% and growth holds up, which remains uncertain, the firm says in a note. “If core inflation confirms around 2.5% and growth holds, a June hike is possible, but we do not think growth will hold.”
In fact, growth risks may ultimately dominate, as the eurozone economy is more fragile than in 2022, with growth projections for 2026 ranging between 0.8% and 1.2%, the analysts say. The central bank faces a delicate balancing act between rising inflation risks and weakening growth. That tension is compounded by the ECB’s history of policy missteps—tightening too early in past crises and too late during the 2022 inflation surge, the analysts say.
ECB Is Between Two Scenarios
At the heart of the ECB’s dilemma is how to interpret the current energy shock. In March, the central bank introduced a framework with three scenarios—baseline, adverse, and severe—each tied to different paths for energy prices.
So far, the eurozone appears to fall somewhere between the baseline and adverse cases, though closer to the former. Lagarde reinforced this view, noting that energy prices have not yet risen enough to push the economy fully into the adverse scenario.
This assessment is broadly shared by investors. According to Neuberger Berman, current data “places the eurozone between the baseline and adverse scenarios, and closer to the first,” with inflation expected to peak at around 3.5% later this year and core inflation rising more moderately to about 2.5%.
DWS’s Moryson agrees: “We are increasingly moving into that middle scenario,” he says. Much depends on how long energy prices remain elevated and whether supply disruptions—particularly around the Strait of Hormuz—intensify.
What’s Next for Eurozone Inflation?
“The actual rise driven by high energy prices will come later: We expect a peak of around 3.5% in late summer, before headline inflation starts to come down again—primarily due to base effects,” Moryson says.
DWS expects inflation to remain relatively subdued in April at around 2.8%-2.9%, with seasonal factors likely to temporarily dampen price pressures. “In the short term, inflation data in April could still appear somewhat calmer,” Moryson adds, noting that core inflation may remain stable or even ease slightly as travel-related effects weigh on service prices. The main inflationary impact of higher energy prices will come with a delay.
When Are the Next ECB Meetings in 2026?
- June 11, 2026
- July 23, 2026
- Sept. 10, 2026
- Oct. 29, 2026
- Dec. 17, 2026
