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March 19, 2026EUROPEAN CENTRAL BANK MONETARY POLICY The European Central Bank (ECB) announced today that it would leave the three key ECB interest rates unchanged. The interest rates on the deposit facility, main refinancing operations and the marginal lending facility will remain at 2.0%, 2.15%, 2.4% respectively.
The European economy grew by 0.2% in the fourth quarter of 2025 driven by strong domestic demand. Growth was no longer weighed down by net exports as it had been in the previous two quarters, however, it was underpinned mainly by services. There has also been an increase in construction and housing renovations as well as firms investing more in research and development, software and databases. Staff expect economic growth to average 0.9% in 2026, 1.3% in 2027 and 1.4% in 2028. This implies a downward revision from December projections reflecting the global effects of the war on commodity markets, real incomes and confidence.
Household spending increased as rising real incomes and historically low unemployment supported demand. The unemployment rate is expected to average 6.3% in 2026 and 2027 and decline to 6.2% in 2028.
Inflation rose to 1.9% in February with energy prices 3.1% lower than a year ago and food price inflation down to 2.5%. In the baseline projections, headline inflation is seen to average 2.6% in 2026, 2.0% in 2027 and 2.1% in 2028. Projections have been revised up influenced by the war in the Middle East.
The asset purchase programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests principal payments from maturing securities.
The Governing Council notes it is determined to see inflation stabilise at its 2.0% medium-term target. The Transmission Protection Instrument is also available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro
Source: European Central Bank:Monetary policy decisions (Press Release); Press Conference; ECB Macroeconomic projections, March 2026
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