The European Central Bank (ECB) will initially not touch the key interest rates in the new year. The deposit interest rate, which is important for banks and savers, remains at 2.0 percent, as the central bank in Frankfurt announced.
February 5, 2026, 2:20 p.mFeb 5, 2026, 2:35 p.m
The ECB Governing Council has left key interest rates unchanged for five meetings in a row. By June there had been a series of reductions: as recently as spring 2024, the deposit interest rate that banks receive when they park money at the central bank was twice as high at 4.0 percent.
Inflation under control
The ECB has good reasons to wait. Inflation, which spiked after Russia’s war against Ukraine began in 2022, has been contained. And lower key interest rates are good for the economy: loans for companies and consumers tend to become cheaper, which can help with larger purchases and boost growth.
In January, the inflation rate in the euro area fell further and, according to an initial Eurostat estimate, reached 1.7 percent, the lowest level since September 2024. The ECB is aiming for stable prices for the currency area with inflation of 2.0 percent in the medium term. The economy in the Eurozone is also remaining robust despite the tariff dispute with the USA, so there is currently no pressure on the ECB to support the economy with further interest rate cuts.
New problem: Trump’s policies weaken dollar
The strengthening of the euro, which recently temporarily exceeded the $1.20 mark – for the first time since 2021, could put pressure on the ECB to act. With US President Donald Trump’s unpredictable policies, confidence in the dollar has suffered on the financial markets, causing the dollar exchange rate to fall and the euro to appreciate.
The appreciation of the euro is putting pressure on Europe’s exporters as their goods become more expensive on world markets. At the same time, the strong euro makes imports that are traded in dollars cheaper. This dampens inflation, which could fall slightly below the ECB’s medium-term target of 2.0 percent in 2026 anyway.
Some central bankers, such as Austrian ECB Governing Council member Martin Kocher, see pressure to cut interest rates if the euro appreciates further. ECB Vice President Luis de Guindos presented a euro exchange rate of 1.20 to the dollar as a critical level.
The ECB sees itself in a comfortable position so far
Recently, the ECB found itself in a “comfortable” situation, as President Christine Lagarde repeatedly emphasized. This is an indication that key interest rates will remain stable for the time being. The ECB wants to avoid excessively rising prices, but also permanently falling prices: If consumers and companies expect discounts, they could postpone purchases, which would slow down the economy. (dab/awp/sda/dpa)