By Marta Vilar – FRANKFURT (Econostream) – The European Central Bank’s Governing Council on Thursday left its key interest rates unchanged and published updated staff projections pointing to weaker growth and higher inflation over the coming years.

The three ECB interest rates will stay at 2.0% for the deposit facility, at 2.15% for the main refinancing operations and at 2.40% for the marginal lending facility.

In a statement, the Governing Council said that “[t]he 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 the conflict would “have a material impact” on near-term inflation through higher energy prices, adding that the medium-term effects would depend on the war’s intensity and duration, as well as how elevated energy costs feed through to inflation and economic activity.

In its latest projections, based on data available up to 11 March, the ECB revised its headline HICP inflation outlook upward across the forecast horizon, now expecting inflation to reach 2.6% in 2026, 2.0% in 2027, and 2.1% in 2028.

Core inflation, excluding energy and food, is projected at 2.3% in 2026, rising to 2.2% in 2027 and to 2.1% in 2028.

At the same time, growth projections were downgraded for the earlier years, with euro area GDP now expected to expand by 0.9% in 2026 and 1.3% in 2027, while the 2028 forecast was left unchanged at 1.4%.