ECB keeps rates steady, shrugs off inflation dip

The European Central Bank kept interest rates unchanged as expected on Thursday, shrugging off a dip in inflation while continuing to warn about an uncertain geopolitical environment.

The ECB left the rate it pays on bank deposits at 2%, where it has been since June, and reaffirmed that it expects inflation to stabilise at its goal, which is also 2%.

"(The ECB's) updated assessment reconfirms that inflation should stabilise at its 2% target in the medium term," the euro zone's central bank said in a press release.

The ECB said the economy remained "resilient in a challenging global environment", highlighting low unemployment, solid private sector balance sheets and the gradual rollout of public spending on defence and infrastructure.

But it repeated its long-standing warning about an uncertain outlook, "owing particularly to ongoing global trade policy uncertainty and geopolitical tensions".

Price growth in the 21 countries that share the euro slipped to 1.7% last month, its lowest level since September 2024, and is expected to stay slightly below the ECB's target for at least a year.

The euro zone economy has nevertheless been picking up pace, with consumption and investments kicking into higher gear in the last three months of 2025.

But last week's tumble in the U.S. dollar, volatility in commodity markets, the Trump administration's war of words over Greenland and its pressure on the Federal Reserve to cut rates, are all reminders that the situation could quickly change.

With Thursday's decision, the interest rates that banks pay to borrow at the ECB's weekly and daily auctions were left unchanged at 2.15% and 2.40%, respectively.

Investors' focus will now turn to ECB President Christine Lagarde's press conference, due to start at 1345 GMT.

(Reporting by Francesco Canepa; Editing by Catherine Evans)