ECB Holds Rates Steady After June Hike, Watching Energy-Driven InflationA · FULL TRANSLATION
- The ECB kept all three key rates unchanged on July 23
- Deposit rate 2.25%, main refinancing 2.40%, marginal lending 2.65%
- The previous meeting saw a hike on Middle East energy prices
- Euro-area inflation eased to 2.8% in June from 3.2% in May
- The next meeting is set for September 9-10
The ECB held all three policy rates steady on July 23, one meeting after hiking in response to Middle East-driven energy prices. Its rationale: current energy prices sit broadly within June's baseline projections, and with euro-area inflation easing to 2.8% and energy price growth slowing to 8.5%, the Council can afford to watch the shock's second-round effects rather than chase them.
The contrast with Tokyo is the story for Japan watchers. Facing the same oil shock, the ECB has a functioning rate tool and has already used it; the Bank of Japan remains squeezed between import inflation and expansionary fiscal policy. That policy-space gap keeps writing itself into the euro-yen exchange rate ahead of the ECB's September 9-10 meeting.
The European Central Bank decided at its July 23 Governing Council meeting in Frankfurt to keep its three key policy rates unchanged: the deposit facility rate at 2.25%, the main refinancing rate at 2.40%, and the marginal lending facility at 2.65%.
The key rates had been held steady for seven consecutive meetings since July 2025, but at the previous meeting the ECB raised rates against the backdrop of energy price increases driven by the Middle East situation. This meeting returned to a hold.
The ECB noted that while the energy price outlook remains elevated compared with pre-crisis levels, current prices are broadly in line with the June baseline projections. Uncertainty remains high and the inflation impact has not yet fully materialized; the Council will carefully monitor the shock's size, duration, and second-round effects, reaffirming its commitment to stabilizing inflation at 2% over the medium term.
Euro-area inflation fell from 3.2% in May to 2.8% in June, with energy price growth easing from 10.8% to 8.5% and food from 1.9% to 1.5%. The next monetary policy meeting is scheduled for September 9-10, 2026. (Source: JETRO Business News; see original for details.)