FRANKFURT – Central bankers once again held key interest rates in the Eurozone at levels set in June, with the monetary policy for the single currency said to still be in a good place.
On Thursday, the European Central Bank decided to stay the course for a fifth straight meeting, as predicted by economists. Officials left their benchmark discount rate at 2%, which has been hovering at that level for more than six months.
ECB President Christine Lagarde even revived some old phraseology to underline the present environment: “We are in a ‘broadly balanced’ situation when it comes to risk assessment.”
Analysts widely anticipate that the ECB will leave policy as is, with the majority predicting current levels of key rates could survive through this year and some of 2027.
Or all of 2027, according to Nomura: “We expect euro area HICP inflation to hover around the ECB’s 2.0% target until the end of 2027, and we forecast GDP growth to reach its pre-pandemic trend rate by mid-2026. Hence, we expect the ECB to leave rates unchanged through 2027.”
A hike in 2028 is the next expected policy move, Nomura predicted.
Indicators say: Do nothing
More support for the decision to hold – a unanimous result, according to Lagarde –likely came Wednesday with the latest Eurozone inflation report, which showed price growth starting off this year moving in the same direction as ended 2025: Downwards. The annual headline reading dropped to 1.7% last month – the lowest since September 2024, according to preliminary data released Wednesday by the EU statistics office. This pushed the main rate even further beneath the ECB target of 2% over the medium term.
Additionally, the less volatile core rate surprised to the downside last month, falling to 2.2%, its weakest since October 2021.
Many analysts were swift to warn that a drop to such a low level could embolden the doves at ECB headquarters, but Lagarde waved off such conjecture, explaining that the bank generally ignores single data points. “We have projected undershooting in 2026 for a long, long time,” she told journalists at the press conference following Thursday’s rate decision. “There is nothing that is really changing the baseline.”
She reiterated that the bank expects inflation to be in-line with its target, underlining the decision to take no action this month.
Inflation is apparently tamed to the liking of most bank officials, and economic growth appears to be sufficient. GDP in the euro area surprised to the upside again last quarter by holding at the 0.3% q/q mark reported in the previous three months.
Lagarde also cited improvement in the service sector, specifically in the areas of information and communications, as growth drivers, adding that construction momentum is picking up.
Massive spending by Berlin on domestic infrastructure and the military is also expected to help lift all Eurozone boats. The region may have gotten its first taste of how those hundreds of billions of euros will boost growth: just hours before the ECB rate decision, Germany said factory orders surged at a monthly rate of 7.8% in December, the biggest rise in two years.
She did warn of “a volatile global policy environment.” The relationships among nations recently has in many cases been tense – Lagarde herself reportedly walked out of a speech critical of Europeans given by US Commerce Secretary Howard Lutnick at last month’s World Economic Forum in Davos, Switzerland.
When prompted, she talked a bit more than usual about the world’s leading currency pair, EUR/USD, which last month pushed above 1.20, stirring concerns about a possible braking effect on the European economy.
She pointed out that the ECB has been watching the dollar’s depreciation against the euro, which started in March 2025. “The impact of the exchange rate since last year is incorporated in our baseline,” she said, noting that the range of the currency pair has been largely in line with the overall exchange rate “since the euro has been around.”
The bank’s next rate decision is set for 19 March, with ECB staff scheduled to release updated economic forecasts.
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session_info.http_referrer = data.http_referrer;
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var months = ['Jan','Feb','Mar','Apr','May','Jun','Jul','Aug','Sep','Oct','Nov','Dec'];
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var current_time = current_date.getTime();
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session_info.curr_delay = (data.effective_latency / 1000).toFixed(2);
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session_info.effective_latency = data.effective_latency;
session_info.mean_opinion_score = data.mean_opinion_score;
session_info.restarts = data.restarts;
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data_array.webrtc_protocol = session_info.protocol;
data_array.ping_time = session_info.ping_time;
data_array.jitter = session_info.jitter;
data_array.packet_loss = session_info.packet_loss;
data_array.effective_latency = session_info.effective_latency;
data_array.mean_opinion_score = session_info.mean_opinion_score;
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- Comments suggest bank to stay the course
- Uncertainty remains
- Lagarde plays down euro strength
By Eric Culp
European Editor, LiveSquawk News
@eculp.bsky.social
@EricCulpLS
5 February 2026 | 11:20 GMT
FRANKFURT – Central bankers once again held key interest rates in the Eurozone at levels set in June, with the monetary policy for the single currency said to still be in a good place.
On Thursday, the European Central Bank decided to stay the course for a fifth straight meeting, as predicted by economists. Officials left their benchmark discount rate at 2%, which has been hovering at that level for more than six months.
ECB President Christine Lagarde even revived some old phraseology to underline the present environment: “We are in a ‘broadly balanced’ situation when it comes to risk assessment.”
Analysts widely anticipate that the ECB will leave policy as is, with the majority predicting current levels of key rates could survive through this year and some of 2027.
A hike in 2028 is the next expected policy move, Nomura predicted.
Indicators say: Do nothing
More support for the decision to hold – a unanimous result, according to Lagarde –likely came Wednesday with the latest Eurozone inflation report, which showed price growth starting off this year moving in the same direction as ended 2025: Downwards. The annual headline reading dropped to 1.7% last month – the lowest since September 2024, according to preliminary data released Wednesday by the EU statistics office. This pushed the main rate even further beneath the ECB target of 2% over the medium term.
Additionally, the less volatile core rate surprised to the downside last month, falling to 2.2%, its weakest since October 2021.
Many analysts were swift to warn that a drop to such a low level could embolden the doves at ECB headquarters, but Lagarde waved off such conjecture, explaining that the bank generally ignores single data points. “We have projected undershooting in 2026 for a long, long time,” she told journalists at the press conference following Thursday’s rate decision. “There is nothing that is really changing the baseline.”
She reiterated that the bank expects inflation to be in-line with its target, underlining the decision to take no action this month.
Inflation is apparently tamed to the liking of most bank officials, and economic growth appears to be sufficient. GDP in the euro area surprised to the upside again last quarter by holding at the 0.3% q/q mark reported in the previous three months.
Lagarde also cited improvement in the service sector, specifically in the areas of information and communications, as growth drivers, adding that construction momentum is picking up.
Massive spending by Berlin on domestic infrastructure and the military is also expected to help lift all Eurozone boats. The region may have gotten its first taste of how those hundreds of billions of euros will boost growth: just hours before the ECB rate decision, Germany said factory orders surged at a monthly rate of 7.8% in December, the biggest rise in two years.
She did warn of “a volatile global policy environment.” The relationships among nations recently has in many cases been tense – Lagarde herself reportedly walked out of a speech critical of Europeans given by US Commerce Secretary Howard Lutnick at last month’s World Economic Forum in Davos, Switzerland.
When prompted, she talked a bit more than usual about the world’s leading currency pair, EUR/USD, which last month pushed above 1.20, stirring concerns about a possible braking effect on the European economy.
She pointed out that the ECB has been watching the dollar’s depreciation against the euro, which started in March 2025. “The impact of the exchange rate since last year is incorporated in our baseline,” she said, noting that the range of the currency pair has been largely in line with the overall exchange rate “since the euro has been around.”
The bank’s next rate decision is set for 19 March, with ECB staff scheduled to release updated economic forecasts.