ECB January Meeting: No Change as Inflation is “in a Good Place”

At today’s meeting, the ECB Governing Council decided to keep its three interest rates unchanged at 2.00%, 2.15% and 2.40% for the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility respectively , with no pre-commitment to a particular rate path . The decision – widely expected – was unanimous. In the monetary policy statement, the Governing Council stressed that “ the economy remains resilient in a challenging global environment. Low unemployment, solid private sector balance sheets, the gradual rollout of public spending on defence and infrastructure and the supportive effects of the past interest rate cuts are underpinning growth. At the same time, the outlook is still uncertain, owing particularly to ongoing global trade policy uncertainty and geopolitical tensions ” . During the press conference, President Lagarde reiterated the ECB mantra according to which “ we stand ready to adjust all of our instruments within our mandate to ensure that inflation stabilises sustainably at its 2% target in the medium term at our medium-term target and to preserve the smooth functioning of monetary transmission ” She also stressed that the Governing Council considered the balanced of risks as “ broadly balanced ”. On inflation, she downplayed the importance of lower-than-expected headline in January indicating that inflation was “in a good place” , while recognising the uncertainties attached to the inflation outlook. As we expected , President Lagarde stressed the strength of the euro and the still prevailing uncertainties from tariffs attracted attention from the Governing Council. She avoided to give any indication about the direction of a possible next move in the policy rate cycle as we also expected. That said, we maintain our view that there will be no change in the monetary policy stance in 2026, still with a dovish bias conditional to fluctuations in exchange rate and energy prices.