Following its latest meeting, the ECB’s Governing Council said the euro area economy remains resilient in a challenging international environment. Low unemployment levels, strong private sector balance sheets, the gradual rollout of public spending on defence and infrastructure, and the continued supportive effects of previous interest rate cuts are all helping to underpin economic growth.

At the same time, policymakers cautioned that the outlook remains uncertain, particularly due to ongoing global trade policy tensions and heightened geopolitical risks.

The Governing Council stressed its determination to ensure that inflation stabilises sustainably at the 2% target. It reiterated that future monetary policy decisions will be taken on a data-dependent, meeting-by-meeting basis, without pre-committing to a specific interest rate path.

Interest rate decisions will be guided by an assessment of the inflation outlook and associated risks, incoming economic and financial data, underlying inflation dynamics, and the strength of monetary policy transmission across the euro area.

Under the decision, the ECB will maintain the deposit facility rate at 2.00%, the main refinancing operations rate at 2.15%, and the marginal lending facility rate at 2.40%.

The ECB confirmed that its Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios are continuing to decline at a measured and predictable pace, as the Eurosystem no longer reinvests principal payments from maturing securities.

The Governing Council underlined that it stands ready to adjust all of its policy instruments within its mandate if necessary to safeguard price stability and ensure the smooth transmission of monetary policy. It also highlighted the availability of the Transmission Protection Instrument to counter unwarranted and disorderly market dynamics that could threaten policy transmission across euro area countries.

ECB President Christine Lagarde is scheduled to provide further details on the decision and the Council’s assessment at a press conference starting at 14:45 CET. (ILKHA)