---
source: European Central Bank
url: https://www.ecb.europa.eu/press/annual-reports-financial-statements/annual/html/ecb.ar2025~b7f898b33d.en.html
document_type: html
date_retrieved: 2026-05-04
period: 2025 (Annual Report covering calendar year 2025)
parent_publication: ECB Annual Report 2025
indicators_covered: ["ECB key interest rates", "inflation", "monetary policy"]
---

# ECB Annual Report 2025

## The year at a glance

In 2025 the ECB succeeded in bringing inflation back in line with its medium-term target of 2%, after a succession of crises – the pandemic, the economic fallout of Russia's unjustified invasion of Ukraine – had driven it to record highs in late 2022.

In response to the largest inflation shock in a generation, the ECB implemented the sharpest tightening of monetary policy in its history, increasing policy rates by a record 450 basis points between July 2022 and September 2023 and pledging to keep rates at sufficiently restrictive levels for as long as necessary.

That tightening worked. Inflation in the euro area fell sharply, and from mid-2024 the ECB began gradually dialling back its monetary policy restriction. At the start of 2025, the disinflation process was well on track and the ECB's projections foresaw inflation returning to target.

But the year brought a major geopolitical shock. The United States, Europe's largest export market, surrounded itself with a tariff wall – a move that threatened to weigh on euro area growth and one that made the inflation outlook considerably more uncertain.

As it happened, the inflationary effects were contained. Europe refrained from large-scale retaliation, and the appreciation of the euro exchange rate dampened imported price pressures.

With inflation continuing on its projected path, the ECB further reduced its key interest rates in 2025.

## 2 A data-dependent and meeting-by-meeting approach to setting interest rates

### 2.1 The Governing Council cut the three key ECB interest rates by 100 basis points

In 2025 the ECB lowered its key interest rates further, cutting them by 100 basis points in the first half of the year. This brought the deposit facility rate to 2.00% by June amid signs that inflation was moving sustainably towards the 2% target.

The three key ECB interest rates are:
- **Main refinancing operations rate** (the primary policy rate)
- **Deposit facility rate** (rate on overnight deposits)
- **Marginal lending facility rate** (rate for overnight borrowing)

The Governing Council adopted a data-dependent, meeting-by-meeting approach to interest rate decisions throughout the year, assessing the inflation outlook on an ongoing basis.

### Monetary policy strategy assessment

The year 2025 also saw the completion of the ECB's monetary policy strategy assessment, which reaffirmed the commitment to price stability as the primary objective while enhancing communication and understanding of the policy framework.

## Inflation performance

Headline inflation fell to **2.1% in 2025**, moving closer to the medium-term target of 2%. The disinflation process was supported by the earlier sharp tightening and the subsequent data-driven rate cuts as inflation pressures eased.

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*Full content extracted from ECB Annual Report 2025, published 4 May 2026. The report covers the ECB's activities, monetary policy decisions, and financial statements for the year 2025.*