The European Central Bank has left its three key interest rates unchanged, pausing six weeks after its first increase in almost three years as renewed fighting between the United States and Iran unsettled energy markets.
The deposit facility rate, the ECB’s main benchmark, stayed at 2.25 per cent on July 23, 2026. The main refinancing rate remained at 2.40 per cent and the marginal lending facility at 2.65 per cent.
In its statement the Governing Council said energy prices, while highly volatile, stood close to the baseline of the June Eurosystem staff projections and well above pre-conflict levels.
ECB President Christine Lagarde told reporters in Frankfurt that the bank was watching the intensity and duration of the shock. “The full inflationary impact of the energy shock has yet to play out,” she said.
Lagarde said the decision had been unanimous, though some members had questioned whether an immediate increase should have been on the table. Waiting until September would bring two further inflation readings and fresh projections.
The pause followed confirmation on July 17, 2026 that eurozone inflation eased to 2.8 per cent in June from 3.2 per cent in May, the first fall this year. Core inflation slowed to 2.4 per cent.
The ECB raised rates by 25 basis points on June 11, 2026, its first move upwards since 2023. Projections published then put average headline inflation at 3.0 per cent for 2026 and growth at 0.8 per cent.
Oil prices fell back towards pre-war levels in late June after a truce covering the Strait of Hormuz, before climbing again in July as the ceasefire broke down and US strikes on Iran resumed.
Alexander Demarco, governor of the Central Bank of Malta, had warned in May that second-round effects from the oil shock rarely showed up overnight.
Lagarde said the bank was not pre-committing to any rate path and that wage expectations still pointed to moderate growth.
