European Central Bank (ECB) investor relations material

Monetary policy decision and outlook

• Key ECB interest rates remain unchanged at 2.00% (deposit), 2.15% (main refinancing), and 2.40% (marginal lending) amid heightened upside inflation risks and downside growth risks.

• Policy remains data-dependent, with no pre-commitment to a specific rate path, and the Governing Council continues a meeting-by-meeting approach.

• The ECB aims to stabilize inflation at 2% in the medium term, closely monitoring energy price shocks and their propagation.

• Uncertainty from the Middle East conflict and energy prices drives a cautious approach.

• The Transmission Protection Instrument remains available to counter disorderly market dynamics.

Economic and inflation developments

• Euro area GDP grew 0.1% in Q1 2026, with domestic demand as the main growth driver.

• Inflation rose to 3% in April, mainly due to surging energy prices; energy inflation hit 10.9%.

• Underlying inflation indicators have changed little, but short-term inflation expectations have increased while longer-term expectations remain anchored.

• Labor market remains resilient, but labor demand is cooling and consumer confidence is weakening.

• Fiscal responses should be temporary, targeted, and tailored to avoid distorting price signals.

Risks and scenario analysis

• Upside risks to inflation stem from persistent energy price shocks and potential spillovers to wages.

• Downside risks to growth include prolonged conflict, supply chain disruptions, and tighter global financial conditions.

• ECB is moving away from its baseline scenario due to increased uncertainty.

• No evidence of stagflation; current conditions differ from the 1970s, with lower unemployment and a robust policy framework.

• The ECB will update scenarios and projections in June to reflect new data.