Live updates: Interest rates steady, Federal Reserve forecasts 1 rate cut in 2026

The European Central Bank (ECB) kept its three key interest rates unchanged at 2.00%, 2.15% and 2.40%.

“The war in the Middle East has made the outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth,” the ECB said in a statement. “It will have a material impact on near-term inflation through higher energy prices. Its medium-term implications will depend both on the intensity and duration of the conflict and on how energy prices affect consumer prices and the economy.”

The ECB raised its inflation forecast over the next three years, and especially in 2026, due to the war in the Middle East. Headline inflation is expected to average 2.6% in 2026, 2.0% in 2027, and 2.1% in 2028, while “core” inflation, which excludes energy and food costs, is projected to average 2.3% in 2026, 2.2% in 2027, and 2.1% in 2028.

At the same time, the central bank revised lower its growth forecast to average 0.9% in 2026, 1.3% in 2027, and 1.4% in 2028.

European stocks fell following the decision. The pan-European Stoxx 600 (^STOXX) dropped 2.76%, Germany’s DAX (^GDAXI) declined 3%, while the CAC (^FCHI) in Paris fell 2.3%.