ECB holds rates steady as energy shock lifts inflation risk

The European Central Bank’s Governing Council left all three key interest rates unchanged on Thursday, October 29, 2026, with the deposit facility rate staying at 2.50%. It said rising energy prices pose upside risks to inflation and downside risks to growth, and it gave no guidance on the next move.

• Deposit facility, main refinancing operations and marginal lending facility rates stay at 2.50%, 2.65% and 2.90% respectively.
• The Governing Council says it is “not pre-committing to a particular rate path” and will decide meeting by meeting.
• The ECB President holds a press conference at 14:45 CET today, where the reasoning behind the hold may be filled in.

• 2.50% deposit facility rate, unchanged; floor of the ECB’s three-rate corridor
• 2.65% main refinancing rate, 15 basis points above the deposit rate
• 2.90% marginal lending rate, 40 basis points above the deposit rate
• 2% medium-term inflation target the Council says it will deliver

The ECB’s monetary policy decisions release says the Governing Council “decided to keep the three key ECB interest rates unchanged.” The text does not report a vote count or say whether the decision was unanimous.

Energy shock lifts inflation risk and cuts growth outlook

The release says energy prices “have continued to rise” and that the “increased magnitude and duration of the energy shock, as well as the implications for indirect and second-round effects, are likely to drive up inflation and lower growth.” The Council says the full effects are “still unfolding.”

It also reports two restraining signals. Underlying inflation “has remained broadly stable so far,” and wages “do not show a material response at this stage.” Financing conditions have tightened since the last meeting, which the ECB says is “likely to weigh on inflation and growth.”

Balance sheet runoff continues, backstop stays in place

The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are “declining at a measured and predictable pace,” because the Eurosystem no longer reinvests principal from maturing securities. The release announces no change to that approach.

The Council says it “stands ready to adjust all of its instruments within its mandate.” It also notes that the Transmission Protection Instrument is available against “unwarranted, disorderly market dynamics.” The release does not say the instrument is being activated or that any market stress prompted the reference.

What the hold means for euro cash and credit desks

The Council is holding rates while saying energy-driven inflation is likely to rise and growth to fall. With tighter financing conditions already doing part of the restraining work, as the release itself says, the Council can wait for data. For desks pricing euro short-term yields, the 2.50% deposit rate remains the reference for cash-like euro instruments, and the 15 basis point gap to the main refinancing rate is unchanged.

The refusal to pre-commit shifts the burden to incoming data. The release names the inflation outlook, underlying inflation dynamics and “the strength of monetary policy transmission” as the inputs. Wage data and any pass-through from energy into core prices are the obvious tests, since the Council points to the absence of a wage response as the reason for patience.

The release leaves several things open. It gives no inflation or growth figures, no size for the energy shock, and no staff projections. It does not say what would trigger a hike or a cut, or when the next meeting falls.

The Governing Council is not pre-committing to a particular rate path.

ECB, monetary policy decisions release, October 29, 2026

The BlockWest read. The ECB has described a stagflationary trade-off and chosen to wait. Its two-sided risk language and its explicit refusal to guide mean euro rate markets will move on every energy and wage print, not on the central bank’s words. Runoff continues in the background, so liquidity keeps draining while rates sit still. Tightening financing conditions are doing the ECB’s work for now. If they ease while energy keeps rising, the hold becomes harder to defend.

Next: the President’s press conference at 14:45 CET today, where reporters will press for the size of the energy shock, the vote and the conditions that would end the hold.

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