ECB holds interest rates steady amid ongoing energy-driven inflation

On Thursday, October 29, 2026, the European Central Bank’s (ECB) Governing Council announced it would maintain its three key interest rates unchanged. The deposit facility rate remains at 2.50 per cent, the main refinancing rate at 2.65 per cent, and the marginal lending facility rate at 2.90 per cent. This decision follows a 0.25 percentage point increase implemented in September.

Central Bank of Cyprus Governor Christodoulos Patsalides warned that a prolonged energy shock, exacerbated by ongoing conflicts in the Middle East, is intensifying inflationary pressures across the euro area. Despite these external challenges, Patsalides highlighted that Cyprus remains resilient due to its sound public finances and a robust banking sector. He noted that the deterioration in the inflation outlook requires continued vigilance to mitigate risks to the broader economic performance.

The current economic environment is characterized by the ECB's commitment to combatting high inflation amid persistent geopolitical tensions. Officials suggest that while Cyprus is currently withstanding rising price pressures, the outlook remains sensitive to the duration of the energy crisis and global stability, necessitating a cautious monetary policy approach.