Goldman Sachs: ECB Interest Rate Review - FJElite

20 Mar 2026 08:20Elite EUR Europe
BOTTOM LINE
The Governing Council left the policy rate on hold at 2%, as expected. The Governing Council stated that the war in the Middle East had made the outlook significantly more uncertain, and that risks to the inflation outlook were tilted to the upside. During the press conference, President Lagarde emphasised that the Governing Council was “well-positioned" to deal with the development of the unfolding shock. The staff downgraded the projections for growth, upgraded the projections for inflation, and published two alternative scenarios with higher and more persistent increases in energy prices.

KEY NUMBERS:
ECB Policy Rate: 2%, GS: 2%, consensus: 2%, previous 2%.

MAIN POINTS:
  • The Governing Council left the policy rate on hold at 2%, as expected, with President Lagarde noting that the decision had been unanimous. The Governing Council stated that risks to the inflation outlook were tilted to the upside. During the press conference, President Lagarde emphasised that the Governing Council was calm, determined, and “well-positioned” to deal with the development of the unfolding shock.
  • The Council stated that the war in the Middle East had made the outlook significantly more uncertain and had created upside risks for inflation and downside risks for economic growth. The Council added that it would have a material impact on near-term inflation, and stressed that the medium-term implication would depend on the intensity and duration of the conflict, as well as on the magnitude of indirect and second-round effects.
  • The staff projections for growth decreased by 0.3pp to 0.9% in 2026, by 0.1 pp to 1.3% in 2027, and were left unchanged at 1.4% in 2028. The headline inflation projections increased by 0.7pp to 2.6% in 2026, by 0.2pp to 2.0% in 2027, and by 0.1 pp to 2.1% in 2028. The core inflation projections increased by 0.1 pp to 2.3% in 2026, by 0.3pp to 2.2% in 2027, and by 0.1 pp to 2.1% in 2028. The staff also published two alternative scenarios with higher and more persistent increases in energy prices.