The ECB left the deposit rate unchanged at 2.00%, in line with expectations. The accompanying statement reaffirmed confidence that inflation should stabilize at the 2% target over the medium term and reiterated a data-dependent, meeting-by-meeting approach to policy decisions.
At the press conference, President Christine Lagarde emphasized that risks are “broadly balanced.” She acknowledged that some risks have increased while others have eased, leaving the Governing Council comfortable with current settings rather than inclined toward near-term action.
Lagarde outlined upside and downside inflation scenarios. On the upside, persistent energy price increases, more fragmented global supply chains, slower moderation in wage growth, and planned boosts in defence and infrastructure spending could lift inflation over the medium term.
On the downside, weaker external demand from tariffs, excess global capacity spilling into euro area imports, tighter financial conditions, and a stronger Euro could all dampen price pressures.
On the exchange rate, Lagarde noted that Euro appreciation could bring inflation down beyond current expectations. However, she added that the Euro’s gains against the dollar since March 2025 are already incorporated into the ECB’s baseline, while stressing that the Bank will continue to monitor pass-through effects closely.
Full ECB statement, Lagarde’s press conference speech.
