Optencis
The European Central Bank (ECB) left its three key interest rates unchanged on 29 October 2026. The main refinancing rate stays at 2.65% and the deposit facility rate at 2.50%, both in line with expectations. The bank said rising energy prices create upside risks to inflation and downside risks to growth.
The decision
The ECB's Governing Council kept the main refinancing rate at 2.65%, the deposit facility rate at 2.50% and the marginal lending facility rate at 2.90%. The deposit rate is the interest banks earn on money they park at the ECB, and it is the rate most often quoted in the news. The official texts did not give details of a vote. The ECB also confirmed that its older bond portfolios, the APP and PEPP, keep shrinking slowly because it no longer reinvests maturing bonds. Bloomberg separately reported that President Christine Lagarde announced an early resignation alongside the decision. The official texts we reviewed gave no further details on this.
Key messages from the statement
Energy was the main theme. Euro area inflation rose to 3.8% in September from 3.2% in August. Energy inflation jumped to 18.9% from 14.3%, and diesel and petrol prices hit new peaks. Inflation excluding energy edged up to 2.3% from 2.1%, and services inflation rose to 3.2% from 3.0%. The ECB said underlying inflation has stayed broadly stable so far and wages show no material response yet. Compensation per employee grew 3.3% in the second quarter, down from 3.6% in the first quarter. However, it warned that the bigger and longer energy shock, plus possible second-round effects, are likely to push inflation up and growth down. On activity, the bank said the economy kept expanding in the third quarter, helped by AI-related investment and government spending on infrastructure and defence. Higher energy prices have hurt consumer confidence, though, and financing conditions have tightened since the last meeting. The unemployment rate was 6.4% in August.
- 1Energy prices riseEnergy inflation 18.9% in September
- 2Headline inflation climbs3.8% in September, from 3.2%
- 3Second-round risk watchedWages show no material response
- 4ECB holds, stays flexibleMeeting by meeting, no pre-commitment
She said the ECB is well placed to handle the current high uncertainty and remains committed to bringing inflation back to 2% over the medium term.
Views reported by the sources, not Optencis opinions.
How it compares with expectations
The decision matched the economic calendar, which forecast the main refinancing rate at 2.65%, unchanged from the previous level. CNBC also reported the hold, citing the 2.5% deposit rate. Since the rate move itself was expected, attention turned to the tone of the statement and to the news about the ECB's leadership. The growth picture had already looked softer before the meeting. Our earlier coverage of the October flash PMI surveys showed euro area business activity growing at its slowest pace in four months.
Read alsoBank of England preview: Bank Rate forecast at 4.00%, up from 3.75%What comes next
The ECB repeated that it will follow a data-dependent, meeting-by-meeting approach and is not pre-committing to any rate path. Its decisions will depend on the inflation outlook, underlying inflation and how well its policy passes through to the economy. The bank said energy prices have risen beyond the path in its September staff projections. This is likely to lift inflation further in the near term and keep it well above the 2% target over the coming quarters. It also pointed to its Transmission Protection Instrument, a tool that allows it to counter disorderly moves in bond markets across euro area countries.
Sources: European Central Bank, CNBC, Bloomberg.
