Unexpectedly surging inflation in France and Spain support the European Central Bank to keep interest rates unchanged, Deutsche Bank predicts that there is no hope of a rate cut this year.

French inflation has risen more than market expectations, and Spanish inflation has also unexpectedly accelerated. This situation provides strong support for the European Central Bank's stance that there is no need for further interest rate cuts. Specifically, the year-on-year increase in French consumer prices jumped from 0.4% last month to 1.1%, far exceeding the median expectation of 0.8% from economists. In Spain, the inflation rate rose slightly from 2.4% to 2.5%, while analysts had generally expected it to fall to 2.3%. Among members of the ECB Governing Council, Francois Villeroy de Galhau, the Governor of the Bank of France, has a relatively more dovish stance. He has warned that a stronger euro and cheap imports from China could put downward pressure on inflation this year. He has repeatedly called on the European Central Bank to maintain a flexible and pragmatic approach when setting borrowing costs. The Bank of France predicts that price growth in the country will accelerate in the coming months, with inflation expected to reach 1.3% by 2026. Data released on Friday showed that the drag on inflation from energy costs in February was reduced after controlled price increases in the same month last year. Meanwhile, the Spanish economy has benefited from a large influx of immigrants and strong growth in the tourism industry, with its growth rate surpassing that of other major eurozone member countries. Currently, the ECB's interest rate policy has entered a significant "stable period." At the first monetary policy meeting of the year held on February 5, 2026, the ECB decided for the fifth consecutive time to keep the current three key interest rates unchanged, a decision that was highly consistent with market expectations. It is worth noting that ECB officials have stated on multiple occasions that they are quite satisfied with the current level of borrowing costs and have not made adjustments since June last year, as inflation has been hovering around the target value of 2%. ECB President Christine Lagarde has reiterated in recent speeches and meeting minutes that the committee will continue to adhere to a "data-dependent" approach and adopt a "meeting-by-meeting assessment" method without predefining a specific interest rate path. Several international mainstream financial institutions, including Deutsche Bank, currently predict that due to the uncertainty in the global trade environment and the nonlinear fluctuations in internal inflation paths, the ECB is highly likely to maintain the deposit rate level of 2.00% unchanged throughout 2026. Next week, the overall price data for the eurozone will be officially released, with Germany expected to report 2.1% on Friday. In addition, the ECB is scheduled to hold its next interest rate decision on March 19, when the officials will release the latest quarterly economic forecast report, which is typically seen as an important window for adjusting policy stance.