# European Central Bank (ECB) > The eurozone's central bank sets interest rates for 350 million people across 20 countries, with a treaty mandate to hold inflation at 2%. **Meta:** type: reference · date: 2026-07-03 · heads: · 4 takes · 1 lenses · 1 regions ## What it is The European Central Bank (ECB), headquartered in Frankfurt, Germany, is the central bank for the 20 countries that share the euro, covering roughly 350 million people. Its primary mandate, set by the Treaty on the Functioning of the European Union, is price stability: 2% inflation in the eurozone over the medium term, measured by the Harmonised Index of Consumer Prices (HICP). The 2% target became formally symmetric in the ECB's July 2021 strategy review, meaning too-low inflation is treated as seriously as too-high. The Governing Council, which sets policy every six weeks, comprises the ECB's six-member Executive Board and the 20 national central bank governors of the eurozone. Three key policy rates define the ECB's stance at any moment: the deposit facility rate (what banks earn on overnight deposits), the main refinancing operations rate (the cost of one-week central bank loans), and the marginal lending facility rate (overnight credit). ## History The ECB was established June 1, 1998, succeeding the European Monetary Institute. The euro entered financial markets January 1, 1999 and physical circulation January 1, 2002. Wim Duisenberg (Netherlands) was the first ECB president, followed by Jean-Claude Trichet (France, 2003 to 2011) and Mario Draghi (Italy, 2011 to 2019). Draghi's July 2012 pledge to do "whatever it takes" to preserve the euro stabilised European bond markets without the ECB deploying a euro of new purchases. The bank became the first major central bank to adopt negative deposit rates in June 2014 (deposit rate: -0.10%) and launched quantitative easing via the Asset Purchase Programme in March 2015. The Pandemic Emergency Purchase Programme (PEPP), launched March 2020, reached €1.85 trillion in cumulative purchases. Post-pandemic inflation drove 10 consecutive rate hikes from July 2022 to September 2023, lifting the deposit rate from -0.50% to 4.00%, the most aggressive tightening in the ECB's history. Christine Lagarde (France), president since November 2019, led both the PEPP expansion and the subsequent tightening cycle. ## Current state As of July 2026, the ECB's deposit rate stands at 2.25%, following a 25 basis-point hike on June 11, 2026, the first rate increase since 2023, prompted by a war-driven oil price shock. The ECB's 2026 inflation projection for the eurozone was revised up to 3.0% at that meeting. All asset-purchase programmes are wound down and the balance sheet is contracting as securities mature. On June 29, 2026, at the ECB's annual forum in Sintra, Portugal, Lagarde announced a shift from "forward guidance" (pre-committing to a specific future rate path) to "framework guidance" (explaining the reaction function without path promises), reducing advance market signalling. Full coverage: [the June 2026 rate decision](/en/n/ecb-rate-hike-energy-shock) and [Lagarde's Sintra address](/en/n/sintra-lagarde-framework-jun29). ## Relationships The ECB sits at the centre of two overlapping European monetary structures. Within the European System of Central Banks (ESCB), it coordinates with all 27 EU national central banks, including the seven whose countries have not adopted the euro. Within the Eurosystem, it works only with the 20 eurozone national central banks, the most influential being Germany's Bundesbank, whose historical culture of monetary conservatism shaped the ECB's institutional DNA. Since November 2014 the ECB has also operated the Single Supervisory Mechanism (SSM), directly supervising roughly 110 of the eurozone's largest banks, with national supervisors handling the rest. The ECB is legally independent of EU political institutions, though the ECB president appears before the European Parliament quarterly to explain policy. Internationally, the ECB participates in G7 and G10 coordination alongside the US Federal Reserve, the Bank of England, and the Bank of Japan. ## What to watch Whether the June 2026 hike is a one-off or the start of a new tightening cycle depends on whether the oil-price shock proves persistent. Lagarde's shift to "framework guidance" makes future ECB moves harder to anticipate from public signals, a deliberate choice to restore policy optionality. Her eight-year non-renewable term ends October 2027, and a succession contest among eurozone governments will open by mid-2027. The eurozone Banking Union remains structurally incomplete: a common deposit-insurance scheme (EDIS) has been under negotiation since 2015 and is the main unresolved pillar. The ECB's balance sheet, which peaked above €8 trillion in the pandemic era, continues shrinking as PEPP and APP securities mature and roll off. ## Regional takes (batched by bias / lens) ### official record - **European Central Bank** (European Union, en) — ECB institutional overview: mandate of price stability for the eurozone, role in banking supervision, and euro area-wide financial infrastructure. Source: https://www.ecb.europa.eu/ecb/html/index.en.html - **European Central Bank** (European Union, en) — Sets out the ECB's monetary policy objective, the three key interest rates, and the toolkit including asset purchases and open market operations. Source: https://www.ecb.europa.eu/ecb/orga/tasks/monpol/html/index.en.html - **European Central Bank** (European Union, en) — Explains the symmetric 2% HICP inflation target adopted in the ECB's July 2021 strategy review, the rationale for the level, and how compliance is measured. Source: https://www.ecb.europa.eu/mopo/strategy/pricestab/html/index.en.html - **European Central Bank** (European Union, en) — Full institutional review of ECB activities in 2025: policy decisions across the rate-cutting cycle, balance-sheet evolution, and banking supervision outcomes. Source: https://www.ecb.europa.eu/press/annual-reports-financial-statements/annual/html/ecb.ar2025~b7f898b33d.en.html ## Across the graph - Related: [[sintra-lagarde-framework-jun29]], [[ecb-rate-hike-energy-shock]] - Entities: Org:ecb, Christine Lagarde, Eurozone, Bundesbank, Mario Draghi --- Canonical: https://rbtfl.xyz/en/n/ecb-dossier