ECB holds rates for fifth consecutive meeting

Bank stands pat, as expected: At its meeting on 4–5 February, the European Central Bank (ECB) decided to keep its deposit rate at 2.00% for the fifth meeting in a row. It also held its refinancing and lending rates at 2.15% and 2.40%, respectively. The decision was in line with market expectations.

Stable inflation drives the decision: The ECB's decision to hold reflected the fact that inflation is expected to hover close to its 2.0% target in the medium term, plus the economy’s resilience amid a challenging global environment. The Central Bank cited a low unemployment rate, healthy private-sector balance sheets, steady increases in defense and infrastructure spending, and the lingering impact of earlier rate cuts as key drivers of economic performance, reinforcing its decision to keep rates steady.

ECB on hold for 2026: The ECB did not provide specific forward guidance on the future path of interest rates, reiterating instead that it will follow a data-dependent and meeting-by-meeting approach to determine the appropriate monetary policy stance. Still, our Consensus is for the ECB to stand pat through the end of this year. Looking to 2027, the panel shows more divergence: While a majority still sees rates on hold, the next-largest group anticipates a modest hike. Downside risks to interest rates stem from a volatile global backdrop. The Bank is set to reconvene on 18–19 March.

Panelist insight: Commenting on the outlook, analysts at Nomura stated: “We expect the ECB to maintain the depo rate at 2.00% for the foreseeable future. We forecast HICP inflation to hover around the ECB’s 2.0% target and GDP growth to reach its pre-pandemic trend rate by mid-2026, and so we believe the ECB can comfortably leave the depo rate at neutral […]. However, owing to a combination of the? unemployment rate likely falling further below its equilibrium rate and our forecast of economic growth rising to a rate meaningfully above potential, we see a real risk that inflation will overshoot the ECB’s target in 2028. We believe the ECB will need to raise rates at that point (at least twice by 25bp) to bring inflation back to target. The risk, however, is skewed to earlier hikes and more hikes should upward inflationary pressures prove stronger than we expect.” Jan von Gerich, analyst at Nordea, added: “We continue to think rates will be on hold for an extended period of time, and the next move will be a rate hike, but not before the second half of next year. In the near term, risks remain somewhat tilted to the downside, but the risk picture gradually shifts to the upside looking further out.”

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