European Central Bank holds interest rates amid inflation surge

The European Central Bank (ECB) decided to keep its main interest rates unchanged on 30 April 2026 despite a rise in inflation across the Eurozone.

Headline inflation increased to 3% in April, driven primarily by a sharp jump in energy prices.

Energy inflation alone rose by 10.9% in April, contributing significantly to the overall inflation figure.

However, the ECB's governing council opted against raising borrowing costs due to concerns that higher rates could further weaken economic growth.

ECB President Christine Lagarde explained that the ongoing conflict is weighing on economic activity, with high energy costs reducing household and business incomes, leading to lower consumption and investment.

Labour demand has also cooled, and economic growth was just 0.1% in the first quarter of 2026.

The ECB debated various options, including a rate hike, but ultimately decided not to act because there were no signs of second-round effects such as rising wage demands.

Lagarde noted that corporate leaders showed no intention to significantly increase wages, which is a key factor in preventing a wage-price spiral that could make inflation harder to control.

This cautious approach contrasts with the ECB's rate hikes in 2022, which were driven by similar concerns.

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