ECB Holds Steady on Interest Rates as Eurozone Inflation Cools to 1.7%

The European Central Bank (ECB) maintained its current monetary policy at its February 5th, 2026 meeting, leaving key interest rates unchanged despite a further decline in Eurozone inflation. This decision reflects the ECB’s confidence that inflation is on a trajectory to stabilize at its 2% medium-term target, even amidst ongoing global economic uncertainties.

Inflation Trends in January 2026

According to a flash estimate from Eurostat, annual inflation in the Eurozone eased to 1.7% in January 2026, falling from 2.0% in December. This marks the lowest level of inflation since September 2024 and dips below the ECB’s 2% target .

A breakdown of the figures reveals:

• Energy Prices: Experienced a significant decline, falling by 4.1% after a 1.9% decrease in December.
• Food, Alcohol & Tobacco: Saw a slight acceleration to 2.7% from 2.5% in December.
• Core Inflation: Eased further to 2.2%, the lowest level since October 2021, excluding volatile energy and food prices.
• Services Inflation: Registered an annual rate of 3.2%, down from 3.4% in December.
• Non-Energy Industrial Goods: Showed a muted rise of 0.4%.

ECB’s Key Interest Rates Remain Unchanged

The ECB’s Governing Council decided to hold its three key interest rates steady at the following levels :

• Deposit Facility: 2.00%
• Main Refinancing Rate: 2.15%
• Marginal Lending Rate: 2.40%

Economic Resilience and Future Outlook

The ECB highlighted the resilience of the Eurozone economy, citing factors such as low unemployment, solid private sector balance sheets, increased public spending on defense and infrastructure, and the positive effects of previous interest rate cuts . However, the central bank also acknowledged ongoing global trade policy uncertainty and geopolitical tensions as potential risks to the outlook.

Euro Appreciation and Data Dependency

Policymakers at the ECB have expressed some concern regarding the recent appreciation of the euro against the dollar . However, the bank indicated it is currently comfortable with the exchange rate, while remaining vigilant for signs of disinflation.

ECB President Christine Lagarde emphasized that future interest rate decisions will continue to be data-dependent and made on a meeting-by-meeting basis, without pre-committing to a specific rate path .

Soft Patch Anticipated

Economists anticipate a “soft patch” in the Eurozone economy lasting at least a year, which is expected to keep the ECB on hold with its current monetary policy .