The market was pricing in a 98% chance of no change in rates today so this was no surprise. Going forward, the market expects the ECB to leave rates on hold for all of 2026 so there isn't much drama here.
The euro was trading at 1.1717 ahead of the report and is up to 1.1736 afterwards on the back of higher inflation forecasts and some worries about sticky services inflation.
The press conference with Lagarde starts at 1345 GMT.
- Deposit rate left at 2.00%
- Main refi rate left at 2.15%
- Marginal Lending Facility: 2.40%
The ECB forecast inflation has been revised up for 2026, pinning the blame squarely on services inflation declining "more slowly" than anticipated. By flagging this, the ECB is signaling they aren't ready to declare "mission accomplished" just yet.
The New Staff Projections
Here is the path the ECB sees for headline inflation:
2025: 2.1%
2026: 1.9%
2027: 1.8%
2028: 2.0%
The rest of the statement is classic Lagarde boilerplate. They reiterated that they are:
Not pre-committing to a particular rate path.
Sticking to a "meeting-by-meeting" approach.
Remaining purely "data-dependent."
The market might have been positioning for a nod toward softer inflation data allowing for a quicker path downward, but the ECB is pushing back with that 2026 revision.
Headline inflation
| Year | New Forecast (Dec '25) | Prior Forecast (Sept '25) | Change |
| 2025 | 2.1% | 2.1% | — |
| 2026 | 1.9% | 1.7% | +0.2% |
| 2027 | 1.8% | 1.9% | -0.1% |
| 2028 | 2.0% | N/A | New |
Core:
| Year | New Forecast (Dec '25) | Prior Forecast (Sept '25) | Change |
| 2025 | 2.4% | 2.4% | — |
| 2026 | 2.2% | 1.9% | +0.3% |
| 2027 | 1.9% | 1.8% | +0.1% |
| 2028 | 2.0% | N/A | New |
