European Central Bank keeps key interest rate on hold at 2.5%

A man walks past the Euro currency sign ('Euro Sculpture' by German artist Ottmar Hoerl) in front of the former European Central Bank (ECB) building in Frankfurt am Main, western Germany, on June 9, 2026. Kirill Kudryavtsev | Afp | Getty Images The European Central Bank voted to hold interest rates steady on Thursday, meeting market expectations, despite euro zone inflation rising to a three-year high. It keeps the central bank's key rate, the deposit facility, at 2.5% following a 25 basis point hike in September .

In a statement, the institution's Governing Council said rising energy prices posed upside risks to the inflation outlook and downside risks to growth, but that underlying inflation and wages were so far broadly stable. Financing conditions have tightened since the last meeting, which is likely to weigh on both inflation and growth, it added. Headline inflation in the euro area hit 3.8% last month , the highest level since September 2023.

Energy price inflation reached 18.8% amid continued turbulence in the Middle East. The resurgence in energy price pressures following the outbreak of the U.S.-Israeli war with Iran in February saw the ECB hike rates in June for the first time since 2023. "Predicting the path of ECB monetary policy is becoming more challenging," Deutsche Bank's chief European economist, Mark Wall, said in a note on Thursday.

"One question is whether the two hikes already delivered and the tightening of financial conditions since September are enough to lean against the further increase in energy inflation risk? Probably not." Wall said the other main question was whether the looming departure of Christine Lagarde as ECB president — a decision she announced earlier on Thursday — would impact decision-making next year. "We think the institution is bigger than the person, but there's uncertainty.

We expect one more hike to 2.75% in December while Lagarde is still President, and that's probably the end of the hiking cycle." This is breaking news. Please refresh for updates.

Source: CNBC