EU Interest Rate Decision: January 2026 Holds Steady at 2.15% as ECB Maintains Cautious Stance
The European Central Bank’s (ECB) Interest Rate Decision for January 2026, released on February 5, 2026, confirmed a steady policy rate of 2.15%. This marks the eighth consecutive month at this level, as the ECB weighs persistent inflation pressures against a fragile growth outlook. The decision aligns with market expectations and underscores the central bank’s data-driven, wait-and-see approach amid ongoing global and regional uncertainties.
Table of Contents
Big-Picture Snapshot
The ECB’s policy rate for January 2026 held at 2.15%, unchanged from December 2025 and consistent with the level maintained since June 2025. This decision follows a rapid tightening cycle that saw rates peak at 2.65% in March 2025 before a 50-basis-point cut in June. The current rate is now in line with the 12-month average, reflecting a period of stabilization after last year’s aggressive moves.
Drivers this month
- Headline inflation for January 2026 is estimated at 2.70% YoY, down from 3.10% in December 2025, but still above the ECB’s 2% target.
- Eurozone GDP growth for Q4 2025 was flat (0.00% QoQ), with Germany and Italy showing mild contractions offset by modest gains in France and Spain.
- Unemployment remains stable at 6.50%, while wage growth has moderated to 3.20% YoY from a peak of 4.10% in mid-2025.
Policy pulse
The ECB’s decision reflects a delicate balance: inflation remains above target, but growth is tepid and core inflation is easing. The policy rate is now at its lowest since March 2025, and the ECB’s statement emphasized “patience and vigilance,” signaling no imminent moves.
Market lens
Immediate reaction: EUR/USD was flat, trading near 1.08, while 2-year Bund yields edged down 2 bps to 2.07%. Markets had fully priced in a hold, with swaps showing less than a 10% chance of a cut before April. Eurozone equities were little changed, reflecting the absence of surprises.
Foundational Indicators
The ECB’s steady hand comes amid mixed macro signals. Inflation, though easing, remains sticky. January’s 2.70% YoY print is down from December’s 3.10% and well below the 4.80% peak in July 2025, but core inflation (excluding energy and food) is still running at 2.40%. Meanwhile, the Eurozone composite PMI averaged 50.20 in January, barely above the expansion threshold, and consumer confidence remains subdued at -16.50.
Drivers this month
- Energy prices stabilized, with Brent crude averaging $81/bbl in January, down from $87 in November 2025.
- Fiscal policy remains neutral: the aggregate Eurozone budget deficit is projected at 3.10% of GDP for 2026, little changed from 2025.
- External shocks: Ongoing Red Sea shipping disruptions and Ukraine conflict continue to pressure supply chains, but impacts are less acute than in 2022–2023.
Policy pulse
The ECB’s rate is now 50 bps below its March 2025 peak. The central bank’s forward guidance remains cautious, with President Lagarde reiterating that “future decisions will be data-dependent.” Fiscal authorities are holding the line on stimulus, wary of reigniting inflation.
Market lens
Eurozone credit spreads have narrowed modestly since December, with the iTraxx Main index at 61 bps (vs. 68 bps in October 2025). The EUR/USD remains range-bound, and equity volatility (VSTOXX) is near 14, its lowest since early 2022.
Chart Dynamics
- March 2025: 2.65% (peak)
- June 2025: 2.15% (cut)
- October 2025: 2.15%
- December 2025: 2.15%
- January 2026: 2.15%
Drivers this month
- Inflation moderation (2.70% YoY) allowed the ECB to maintain its pause.
- Growth stagnation and external risks (geopolitics, supply chains) reinforced caution.
Policy pulse
The ECB’s rate is now at a post-pandemic low, but still above pre-2022 levels (0.75% in March 2013). The central bank is signaling patience, awaiting clearer evidence of inflation convergence to target.
Market lens
Immediate reaction: EUR/USD was unchanged, while 2-year Bund yields dipped 2 bps. Market-implied ECB rate for December 2026 is 1.85%, suggesting traders expect one or two cuts by year-end, but no urgency.
Forward Outlook
The ECB’s January 2026 hold sets the stage for a cautious, data-driven spring. The central bank faces a delicate balancing act: inflation is easing but not yet at target, while growth risks are rising. The Sigmanomics database consensus expects the ECB to remain on hold through at least June 2026, with a 60% probability of the next move being a cut in Q3 2026.
Bullish, base, and bearish scenarios
- Bullish (20%): Inflation falls below 2% by May, growth rebounds, and ECB cuts rates by 25 bps in June, boosting risk assets.
- Base (60%): Inflation drifts toward target, growth remains sluggish, and ECB holds rates steady through Q3, with a first cut in September.
- Bearish (20%): Inflation re-accelerates due to energy shocks or wage pressures, forcing the ECB to hold or even hike, risking recession.
Risks and uncertainties
Key risks include renewed energy price spikes, escalation of geopolitical tensions (Ukraine, Middle East), and fiscal slippage in large member states. Upside risks center on faster disinflation and a stronger global recovery.
Market lens
Markets are pricing in a “higher for longer” scenario, with swaps implying only 30 bps of easing by year-end. Eurozone bank stocks and sovereign spreads will be sensitive to any shift in ECB tone or macro data surprises.
Closing Thoughts
The ECB’s January 2026 rate decision underscores a period of policy stasis, as the central bank navigates persistent inflation and fragile growth. With rates unchanged at 2.15% for eight straight months, the ECB is signaling patience and a strong commitment to its inflation mandate. The path forward remains highly data-dependent, with markets and policymakers alike watching for clearer signals on both inflation and growth.
The Sigmanomics database will continue to track ECB policy, macro indicators, and market reactions as the outlook evolves. For now, the Eurozone remains in a holding pattern, with risks finely balanced and the next move likely months away.
Key Markets Likely to React to Interest Rate Decision
The ECB’s policy rate decisions have direct and indirect impacts on a range of financial instruments. Historically, the following symbols have shown strong correlations with ECB rate moves, reflecting shifts in monetary policy, risk sentiment, and macroeconomic outlook. These assets span equities, currencies, and crypto, offering diverse exposure to Eurozone monetary dynamics.
- DAX (German equities index; highly sensitive to ECB policy and Eurozone growth expectations)
- EURUSD (Euro/US Dollar; tracks rate differentials and ECB guidance)
- EURJPY (Euro/Japanese Yen; reflects risk appetite and relative central bank stances)
- ETHEUR (Ethereum/Euro; crypto assets often react to shifts in Eurozone liquidity and risk sentiment)
- BTCUSD (Bitcoin/US Dollar; global risk barometer, sensitive to central bank policy and macro volatility)
| Year | ECB Rate (%) | DAX YoY Change (%) |
|---|---|---|
| 2020 | 0.00 | -3.10 |
| 2021 | 0.00 | 15.80 |
| 2022 | 0.50 | -12.30 |
| 2023 | 1.75 | 9.60 |
| 2024 | 2.50 | 5.20 |
| 2025 | 2.15 | 2.40 |
Since 2020, DAX performance has shown a negative correlation with ECB rate hikes, with equities rallying during periods of rate cuts or stasis. The current plateau in rates suggests limited upside for equities unless growth surprises to the upside or the ECB signals imminent easing.
FAQ
Q: What does the ECB’s January 2026 rate hold mean for Eurozone borrowers?
A: The steady 2.15% rate means borrowing costs remain unchanged for households and businesses, supporting stability but offering little new stimulus.
Q: How does the January 2026 decision compare to previous ECB moves?
A: The ECB has held rates at 2.15% since June 2025, following a rapid tightening cycle and a single 50-basis-point cut. This marks the longest pause since 2021.
Q: What are the main risks to the ECB’s current policy stance?
A: Upside risks include renewed inflation shocks or fiscal slippage; downside risks center on weaker growth or external shocks that could force earlier easing.
Bottom line: The ECB’s January 2026 hold signals a cautious, data-driven approach as inflation and growth risks remain finely balanced. Markets are likely to remain range-bound until clearer signals emerge.
Author: Sigmanomics Editorial Team
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
Updated 2/5/26
The ECB’s main rate for January 2026 (2.15%) is unchanged from December 2025 (2.15%) and matches the 12-month average (2.15%). This marks a sharp contrast to the first half of 2025, when rates were cut from 2.65% (March) to 2.15% (June), and then held steady. The last rate move was the 50-basis-point cut in June 2025, ending a tightening cycle that began in 2022.
A time-series chart of ECB rates since March 2025 would show a steep drop from 2.65% to 2.15% between March and June, followed by a flat line through February 2026. This plateau signals the ECB’s preference for stability as inflation and growth risks remain finely balanced.