ECB Leaves Rates on Hold as Expected

European Central Bank President Christine Lagarde said the central bank will do everything necessary to keep inflation under control despite the latest surge in energy prices. Speaking in an interview on Tuesday, Lagarde stressed that policymakers remain committed to preventing a repeat of the sharp price spikes seen in recent years. “I can assure you ... that we will do everything necessary to keep inflation under control and to ensure that the French, the Europeans, do not experience inflationary increases like those we saw in 2022 and 2023,” she said. Lagarde noted that Europe is now better positioned to absorb the current energy shock than it was during the 2022 crisis, thanks to stronger policy responses and improved resilience across the region. However, she also warned that uncertainty and market volatility remain elevated

The European Central Bank said policymakers expected inflation to drop further below their 2% target before the recent surge in energy prices linked to the Middle East conflict. Minutes from the February 4–5 meeting showed officials were comfortable keeping interest rates unchanged and believed the overall outlook was stable, supported by the euro’s strength against the dollar. At the time, inflation was projected to fall below target in the near term, though policymakers warned that volatile energy prices could quickly alter the outlook. That risk has now become more visible after oil prices jumped more than 20% this week, which could push inflation higher in the short run since Europe relies heavily on imported energy. Markets are now pricing in a small chance of a rate hike by December. For now, the bank says its policy stance is appropriate, but it remains ready to adjust if inflation risks intensify.

The ECB left interest rates unchanged at its first policy meeting of 2026, reiterating that inflation is expected to stabilize at its 2% target over the medium term. The interest rate on the main refinancing operations was maintained at 2.15%, while the deposit facility and marginal lending rates were kept at 2.0% and 2.4%, respectively. The ECB said the euro area economy remains resilient, but cautioned that the outlook remains uncertain, particularly due to global trade policy risks and ongoing geopolitical tensions. Speaking at the ECB press conference, President Lagarde reiterated that both the central bank and the euro area inflation outlook are in a “good place.” She warned that inflation figures may move unevenly in the months ahead, but emphasized that policy decisions should not be driven by any single data release. Lagarde also acknowledged that uncertainty around the inflation outlook is higher than normal, reflecting the volatility of the global policy environment.