Business · 2026-10-29 · Afternoon briefing

ECB holds interest rate at 2.5% despite inflation surge

The European Central Bank held its key deposit rate at 2.5% on Thursday, pausing its tightening cycle after a 25 basis-point hike in September. The decision came despite headline inflation in the euro zone hitting a three-year high of 3.8% last month, driven by an 18.8% surge in energy prices.

The bank's Governing Council acknowledged that rising energy costs posed risks but noted that underlying inflation and wages remained broadly stable. President Christine Lagarde confirmed the council had debated another hike but unanimously opted to hold its position, citing accumulating economic uncertainty as the primary reason for a more measured approach.

Complicating future policy, Ms Lagarde announced her looming departure as ECB president on the same day. Analysts at Deutsche Bank expect one final hike to 2.75% in December before the cycle ends, but the leadership transition introduces a fresh layer of uncertainty for the central bank.

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• European Central Bank keeps key interest rate on hold at 2.5%
• ECB holds deposit facility rate at 2.5% despite inflation concerns

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