Overview
- The ECB left rates unchanged and raised some 2026 growth and inflation projections, yet still expects inflation to undershoot its target over the next two years.
- Senior officials including Francois Villeroy de Galhau, Olaf Sleijpen, Olli Rehn, Martin Kocher and Jose Luis Escrivá emphasized keeping both easing and tightening options open.
- Villeroy pressed for “maximum optionality” and flagged greater downside risks to inflation.
- Markets have largely priced out a near-term cut, with parts of the curve now pointing to a potential rate increase in 2027.
- Policymakers warned that falling energy prices, geopolitics and a developing trade war could quickly shift the outlook and policy path.