30th October 2026
The European Central Bank (ECB) has kept interest rates unchanged, but the decision offers little reassurance that borrowing costs have peaked. Rising oil and gas prices, driven by the continuing conflict in the Middle East, are increasing the risk of another wave of inflation across Europe.
Announcing its decision on 29 October, the ECB left its deposit rate at 2.50%, its main refinancing rate at 2.65% and its marginal lending rate at 2.90%. The bank warned that the energy shock could push inflation higher while simultaneously weakening economic growth.
The dilemma is familiar. Raising interest rates can help contain inflation by discouraging borrowing and spending, but it cannot directly reduce the price of oil or restore disrupted energy supplies. Higher rates could therefore compound the pressure on households and businesses already facing rising fuel, heating and transport costs.
The ECB is also conscious that the effects of higher energy prices can spread beyond petrol pumps and energy bills. Businesses may pass increased costs on to customers, while workers may seek higher wages to compensate for the loss of purchasing power. If these effects become persistent, central banks may feel obliged to tighten monetary policy further.
Why other countries may raise rates
The ECB is not acting in isolation. Major central banks are facing similar pressures, but their decisions depend on the strength of their economies and how firmly inflation is under control.
In the United Kingdom, Bank Rate stands at 3.75%, with the next decision due on 5 November. Markets are increasingly expecting a rise as higher energy prices threaten to push inflation further above the Bank of England's 2% target.
In the United States, the Federal Reserve has also held rates steady, but investors expect the possibility of another increase if inflation remains stubborn. Australia, meanwhile, has already been raising rates in response to persistent price pressures.
The ECB's decision to wait does not mean it is ruling out further increases. Reports suggest a December rise is a serious possibility, although the final decision will depend on incoming economic data.
What this means for households
For borrowers, particularly those with mortgages due for renewal, the prospect of higher interest rates is unwelcome. Savers may benefit from improved returns if rates rise, but higher borrowing costs can weaken consumer spending, business investment and economic growth.
The central banks face a difficult choice: tolerate some temporary inflation caused by expensive energy, or raise rates to reduce the risk that inflation becomes entrenched.
For Britain, the coming Bank of England decision is particularly important. With the Chancellor having just delivered the Budget, the prospect of higher borrowing costs adds another complication to the outlook for household finances, businesses and the public finances.
The key question is whether this is a temporary energy-price shock or the beginning of a more persistent inflation problem. If energy prices remain high, the pause in interest-rate increases seen this week could prove temporary.
ECB Monetary policy decisions 29 October 2026
Note
The Federal Reserve concluded its most recent meeting yesterday (October 28, 2026), leaving interest rates unchanged at 3.75%–4.00%. The Bank of England will announce its next interest rate decision on Thursday, November 5, 2026.