ECB maintains key interest rates, highlights economic resilience
The European Central Bank's Governing Council decided today to keep its three key interest rates unchanged. The decision follows an updated assessment confirming inflation is set to stabilize at 2 percent in the medium term, and the Council also welcomed Bulgaria's entry into the euro area.
Steady rates as inflation nears target
The European Central Bank's Governing Council decided to keep its three key interest rates unchanged, reaffirming its commitment to stabilizing inflation at 2 percent in the medium term.
The latest assessment indicates inflation is on track, with the January figure at 1.7 percent, down from 2.0 percent in December.
Core inflation also decreased to 2.2 percent.
Economic activity showed resilience, with euro area GDP growing by 0.3 percent in the fourth quarter of 2025, primarily driven by the services sector.
The labor market remains robust, with unemployment falling to 6.2 percent in December.
The Council emphasized that future policy decisions will remain data-dependent, based on inflation outlook, underlying inflation dynamics, and monetary policy transmission, without pre-committing to a specific rate path.
Navigating geopolitical headwinds
Despite the euro area's resilience, the outlook remains clouded by persistent global trade policy uncertainties and geopolitical tensions, including Russia's unjustified war against Ukraine.
The Governing Council underscored the urgent need to strengthen the euro area economy, prioritizing sustainable public finances, strategic investments, and growth-enhancing structural reforms.
Further capital market integration and the swift adoption of the digital euro regulation are also deemed crucial.
Financial conditions show market interest rates have decreased, but bank lending rates to companies rose to 3.6 percent in December.
Corporate loan demand saw a slight increase in Q4 2025, particularly for inventory and working capital financing, even as lending standards tightened.
A cautious hold, not a pause
This decision reflects the ECB's careful balancing act between disinflationary progress and lingering uncertainties.
While the data supports a stable outlook, the emphasis on data-dependence signals a readiness to act if conditions shift.
The call for structural reforms and capital market integration highlights a recognition that monetary policy alone cannot address all challenges.