European Central Bank (ECB) Monetary Policy Decision summary

Key monetary policy decisions and outlook

• Interest rates remain unchanged, with a data-dependent, meeting-by-meeting approach guiding future decisions.

• Deposit facility is at 2.00%, main refinancing at 2.15%, and marginal lending at 2.40%.

• Inflation is projected to stabilize at the 2% target in the medium term, with recent figures showing a decline to 1.7% in January.

• Economic growth is supported by low unemployment, robust private sector balance sheets, increased public spending, and effects of previous rate cuts.

• No pre-commitment to a specific rate path; all instruments remain available to ensure inflation targets are met.

Economic activity and labor market

• Q4 2025 GDP grew by 0.3%, driven mainly by services, especially information and communication.

• Manufacturing remains resilient, and construction momentum is increasing, aided by public investment.

• Unemployment fell to 6.2% in December, with labor incomes and lower household saving rates expected to boost consumption.

• Business investment is strengthening, particularly in digital technologies and AI-related infrastructure.

• Labor market indicators show increased participation and low unemployment, though vacancy growth is moderating.

Inflation dynamics and risks

• Headline inflation fell to 1.7% in January, with energy inflation negative and food inflation slightly up.

• Core inflation (excluding energy and food) eased to 2.2%, consistent with the medium-term target.

• Wage growth is moderating, but the contribution from non-negotiated components remains uncertain.

• Upside risks include persistent energy price increases, supply chain fragmentation, and higher defense spending.

• Downside risks stem from weaker external demand, a stronger euro, and more volatile financial markets.