ECB holds the deposit rate at 2.50% as the energy shock grows
Serguey Asael Shinder1 min readThe European Central Bank left its three key interest rates unchanged on 29 October. The deposit facility rate stays at 2.50%, the main refinancing rate at 2.65% and the marginal lending rate at 2.90%.
The Governing Council's statement puts the energy shock at the centre. Energy prices have continued to rise, which it says poses upside risks to the inflation outlook and downside risks to growth. So far, underlying inflation has remained broadly stable and wages show no material response, but the Council expects the larger size and longer duration of the shock, along with indirect and second-round effects, likely to push inflation up and growth down. It also notes that financing conditions have tightened since its previous meeting, which is likely to weigh on both inflation and growth.
The ECB repeated that it will decide meeting by meeting based on incoming data, the dynamics of underlying inflation and the strength of monetary policy transmission, and that it is not pre-committing to a particular rate path. The asset purchase and pandemic purchase portfolios continue to decline as maturing securities are not reinvested. The Council said it stands ready to adjust all instruments and that the Transmission Protection Instrument remains available against disorderly market dynamics.
On the same day, President Christine Lagarde told the Governing Council that she will step down on 7 February 2027.
What it means
The statement describes two forces pulling in opposite directions and does not say which will win: an energy shock that is getting bigger, and tighter financing that does part of the central bank's work for it. Holding while both play out keeps every option open. The phrase about second-round effects is the one to watch in December, when new staff projections will show whether the Council thinks wages are starting to respond.