ECB Holds Rates Steady but Warns Energy Shock Has Raised Inflation Risks

The European Central Bank left interest rates unchanged on Wednesday but sharpened its warning on the outlook, saying risks had worsened on both sides of its mandate as higher energy prices raise inflation pressure and weigh on growth.

In a monetary policy decision published April 30, the ECB said it kept its three key rates steady: the deposit facility at 2.00%, the main refinancing operations rate at 2.15% and the marginal lending facility at 2.40%. Those levels have been in place since June 2025, and the central bank had also left them unchanged at its previous meeting on March 19.

The ECB said incoming information had been “broadly consistent” with its earlier assessment of the inflation outlook. But it added that “the upside risks to inflation and the downside risks to growth have intensified.” The Governing Council, the euro zone central bank’s main rate-setting body, explicitly tied that shift to the war in the Middle East, saying the conflict had led to a sharp increase in energy prices, pushing up inflation and hurting economic sentiment.

The central bank said the medium-term effects would depend on the intensity and duration of the conflict and on whether so-called second-round effects emerge — meaning an initial jump in prices feeds more broadly into wages and other costs. That framing underscores that the significance of Thursday’s decision was not a change in borrowing costs, but a more cautionary description of the balance of risks facing the euro-area economy.

Fresh inflation data published the same day added context to the ECB’s message. Eurostat, the European Union’s statistics agency, said in its flash estimate that annual inflation in the euro area rose to 3.0% in April from 2.6% in March, showing that price pressures remain above the ECB’s 2% medium-term target.

Even so, the ECB did not signal a predetermined next step. It repeated that it will follow a data-dependent, meeting-by-meeting approach and is “not pre-committing to a particular rate path.” That keeps the focus on incoming economic data and the evolution of the energy shock rather than on any explicit guidance about future rate moves.

The ECB also said the asset purchase program, or APP, and the pandemic emergency purchase program, known as PEPP, are continuing to shrink as the Eurosystem no longer reinvests principal payments from maturing securities. It reiterated that it stands ready to adjust its tools within its mandate and said the Transmission Protection Instrument remains available to counter unwarranted, disorderly market moves that could impair the transmission of monetary policy across the euro zone.

ECB President Christine Lagarde was due to comment on the decision at a news conference scheduled for 14:45 CET.