ECB holds rates steady, on deposits 2% remains

No surprises from Frankfurt: the Governing Council of the ECB decided to keep the monetary policy interest rates unchanged: at 2% for deposits at the central bank, 2.15% for main refinancing operations and 2.40% for marginal lending operations. The decision was taken unanimously.

Slightly changed is the diagnosis of the inflation situation, which now appears to be 'around' the medium-term target of 2%, an adverb that did not appear in the July communiqué, but only because the August figure marked a marginal increase to 2.1% from 2% in July and June. Meanwhile, price dynamics projections show an average inflation of 2.1% this year, 1.7% in 2026, and 1.9% in 2027. In June, the estimates were 2%, 1.6% and 2%, respectively. Meanwhile, core inflation is expected to average 2.4 % this year (unchanged since June), 1.9 % in 2026 (unchanged) and 1.8 % in 2027 (was 1.9 %).

These are indications that, by aiming for a price velocity slightly below 2 per cent over the monetary policy horizon, they could also leave room for further rate cuts, but at the press conference President Christine Lagarde explained that that minimal deviation from the target is linked to the exchange rate; and the level of the euro, as she has mentioned on many occasions in the past, is not a target and cannot be controlled by monetary policy. Lagarde then very much emphasised - in response to a question on the central bank's next moves - that 'we continue to be in a good situation', reiterating that the next decisions will be made on the basis of the data.

Small movements for the growth forecasts; if for this year the projections indicate 1.2%, from 0.9% in June, for next year they point to 1%, down from 1.1% three months ago, while they remain unchanged at 1.3% in 2027. After the tariffs agreement with the US, the new estimates are close to the June baseline scenario: the alternative 'severe' scenario therefore seems to be averted. The projections have been adjusted taking into account the non-retaliation on tariffs by the EU and the overall reduction in uncertainty.

The slowdown in the second quarter, Lagarde explained at the press conference, represents an 'initial' impact of the new global trade situation. Demand, she continued, should still be supported by low unemployment and private and public investment in infrastructure and defence, while the impact of 'headwinds' - such as a stronger euro - should fade next year.