Experts weigh in as ECB leaves interest rates unchanged

The European Central Bank’s choice to keep interest rates unchanged came as no surprise. Policymakers emphasised a data-driven approach, reviewing conditions at each meeting without committing to a future rate path.

Recent economic data suggests that growth is strong, while inflation has fallen below the target. This decrease is mainly due to lower energy prices and easing price pressures in other areas of the economy.

Despite the steady tone, the focus is still on inflation expectations and overall financial conditions. Weaker services inflation, signs of decreasing wage growth, and a stronger euro have led to concerns that inflation might stay below target for a longer period. Policymakers, however, are staying vigilant about potential risks from commodities and tighter financing conditions.

Read the expert analysis and insights below:

 Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, said:

“The European Central Bank (ECB) left interest rates and forward guidance unchanged as expected, with little shift from their narrative that things are currently in a good place from their perspective.

“On the economic outlook, the ECB have taken solace in solid Q4 growth prints to reemphasise their message of growth resilience, but we see some risks of undershooting inflation in the latest January print being sustained.

“While rates are likely to be held in the near-term we still see clear risks that undershooting inflation may prove to be persistent, prompting action by the ECB over the course of the year. The recent fall in services inflation is consistent with expected wage disinflation, while trade diversion from China also remains prominent in shaping our view of downside risks to inflation alongside a further euro appreciation. On the other side, the ECB will be monitoring any persistence in commodity price increases.

“Moreover, we see risks to monetary policy transmission through a tightening of financing conditions – with recent ECB surveys and bank interest rate data pointing to tighter firm financing conditions. This may lead to the ECB considering if action is needed to keep the broader financing environment from becoming unduly restrictive.”

Felix Feather, Economist, at Aberdeen said; 

“The European Central Bank (ECB) left policy unchanged today, aligning with market expectations and our own forecasts. 

Communication of the decision hewed to the familiar “data‑dependent, meeting‑by‑meeting” line and the refrain that “the Governing Council is not pre-committing to a particular rate path.” even as euro appreciation nudged the balance of risks toward a slightly softer inflation path. 

We think the disinflationary impulse from a stronger euro relative to the ECB’s prior expectations will be relatively modest. The recent move in the euro against a broad trade weighted basket of goods has not been particularly sharp, and passthrough to consumer prices tends to be fairly mild.

All considered, we are sticking to our on‑hold‑through‑2026 call.”

Lindsay James, investment strategist at Quilter:

“The European Central Bank’s decision to maintain its hold on interest rates had long since been priced in. With inflation now well below the 2% target and economic indicators broadly stable, the central bank has little incentive to adjust its position in the near term.

“Headline inflation fell to 1.7% in January, largely thanks to lower energy prices, while core inflation stands at 2.2%. The most recent ECB staff projections saw inflation easing to 1.9% in 2026 and 1.8% in 2027, strengthening the case for holding rates for the foreseeable future. What’s more, despite the ongoing external pressures, growth also remains steady. GDP rose 0.3% in the final quarter of 2025, and ECB staff growth projections expect eurozone GDP to reach 1.2% in 2026, and 1.4% in 2027.

“With interest rates already far lower than its peers, inflation closely aligned with target and economic growth relatively steady, the ECB’s policymakers can afford to remain patient. For now, and likely for the remainder of the year, the ECB is in a comfortable ‘wait‑and‑see’ position.”

Konstantin Veit, Portfolio Manager at PIMCO:

“As widely expected, the ECB left policy rates unchanged, with the overall outcome of the meeting largely in line with prior guidance and market expectations. The central bank remains in a comfortable position, with inflation close to target, growth holding up at trend‑like levels, and labour markets remaining solid. Against this backdrop, policymakers appear broadly satisfied with policy rates sitting around the mid‑point of the estimated neutral range and see little reason to adjust settings at this stage. 

“We share the Governing Council’s majority view that risks to the medium‑term inflation outlook remain broadly balanced. Over the course of this year, we expect inflation to transition towards a more sustainable 2% rate, supported by a gradual easing in services and wage inflation towards levels consistent with medium‑term price stability. While services and wage inflation remain elevated, the ECB is likely to look through the modest and largely energy‑driven deviations from target in order to preserve conventional policy space, particularly as inflation expectations remain well anchored. 

“As a result, we continue to expect policy rates to remain unchanged for the foreseeable future, while keeping an open mind on the direction of the next move once this period of inaction comes to an end.”

Daniele Antonucci, Chief Investment Officer at Quintet Private Bank (parent of Brown Shipley) comments:

The ECB on-hold decision continues to signal that policy is in a comfortable position, with inflation expected to stabilise around the 2% target over the medium term.

Growth remains supported by a resilient labour market, healthy private‑sector balance sheets and the ongoing rollout of public investment, while earlier rate cuts continue to filter through to activity.

Yet the wider environment remains a downside risk. Shifts in global trade policy, geopolitical tensions and recent volatility in commodity and currency markets highlight how quickly conditions could change. The euro’s recent rise against the dollar has revived concerns about imported disinflation, especially as headline inflation dipped to 1.7% last month on the back of lower energy costs.

Even so, policymakers appear comfortable with the balance of forces for now: on a trade‑weighted basis the euro has eased slightly, longer‑term inflation expectations remain broadly anchored, and firmer wage and lending data point to ongoing domestic strength. Against this backdrop, the ECB is maintaining a data‑dependent, meeting‑by‑meeting approach, avoiding any commitment to a predetermined path for rates.

Domestic resilience remains the central pillar of the euro‑area story for markets, and an upside risk that’s not fully priced in. Consumer spending has offset weakness in trade and industrial production, helped by high savings buffers and tight labour markets. Fiscal expansion in Germany, particularly on defence and infrastructure, should provide additional support in the coming years.

The balance between these internal dynamics and external risks will shape the policy path into 2026 and beyond. Many expect rates to stay unchanged through this year, and we agree with that baseline scenario. But, if inflation undershoots for long enough to weigh on expectations, the ECB may need to consider further support.

For now, the central bank maintains a steady hand. Policy remains in what President Lagarde calls a “good place”, but with the flexibility to respond if the balance of risks shifts.

Nicolas Forest, Chief Investment Officer at Candriam:

“As expected, the ECB left policy rates unchanged, reaffirming that it is “in a good place” and remains firmly data-dependent. 

“Looking ahead, a sustained fall in inflation towards 1.5%, materially below the ECB current forecasts, could tilt the communication in a more dovish direction and reopen the door to a rate cut by year-end.

“Conversely, a more pronounced upswing in growth that pushes unemployment lower would likely prompt the ECB to reassess inflation risks—raising the possibility that the next move in policy rates could be upward.

“Against this backdrop, the ECB has good reasons to stay on hold for some time.

“Inflation has continued to cool and is now below target (1.7% year-on-year in January). Wage pressures are also moderating. Still, activity has proven resilient, and the ECB expects growth to firm into 2026 as Germany’s fiscal plan comes on stream.

“The recent appreciation of the euro was acknowledged today, but it does not appear to be a major source of concern. The move seems largely driven by a confidence-related adjustment on the US dollar side, and against all its partners, the euro has barely appreciated.”