ECB Holds Rates Steady in July as Lagarde Warns Middle East Energy Shock Will Keep Inflation Elevated Through First Half of 2027
The ECB kept its three rates steady on July 23: deposit 2.25%, refi 2.40%, marginal 2.65%, following June's 25‑bp hike.
EUROPEAN UNION,ECONOMY
Global N Press
7/23/20261 min read
On July 23, 2026, the European Central Bank announced it would keep the three key euro area interest rates unchanged, with the deposit facility rate, main refinancing operations rate, and marginal lending facility rate remaining at 2.25%, 2.40%, and 2.65% respectively. This was the ECB's first rate-setting meeting since its 25-basis-point rate hike in June. ECB President Christine Lagarde stated at the post-meeting press conference that since the outbreak of the Middle East conflict, rising energy prices and their impact on goods and services prices are likely to keep euro area inflation above the 2% target through the first half of 2027. The ECB noted in its statement that while energy price developments remain highly volatile, they currently stand close to the baseline of the June Eurosystem staff projections and well above the levels recorded prior to the conflict, with the full inflationary impact of the energy shock yet to materialize.
Lagarde said that despite the continued drag from the Middle East conflict on the economy, economic activity in the euro area improved somewhat in the second quarter, and growth is expected to remain moderate in the near term. According to Eurostat, euro area inflation declined to 2.8% in June from 3.2% in May. However, with oil prices surging due to the escalation of the Iran conflict, speculation over a possible ECB rate hike in September has intensified. Lagarde stressed that the ECB would assess incoming data before making monetary policy decisions on a meeting-by-meeting basis and would not pre-commit to a particular rate path. The ECB stated that uncertainty remains high and the full inflationary impact of the energy shock has yet to play out.
