European equities climbed on Thursday after the European Central Bank left its benchmark deposit rate unchanged and pointed to signs that inflationary pressure across the euro zone is beginning to ease, reinforcing expectations that borrowing costs have peaked for this cycle.

The ECB's governing council voted to hold the deposit facility rate at 3.25 percent, a level it reached after a series of cuts from a 2025 high. President Christine Lagarde told reporters in Frankfurt that recent consumer-price data, while still above the bank's 2 percent target, showed encouraging moderation in services inflation and energy costs.

The Stoxx 600 index rose 0.8 percent in afternoon trading, led by gains in industrial and consumer-discretionary shares. Germany's DAX added 0.9 percent, while France's CAC 40 advanced 0.7 percent. Banking stocks, which are particularly sensitive to rate expectations, outperformed the broader market.

Lagarde cautioned that the central bank remains data-dependent and that geopolitical risks, including energy-market volatility tied to tensions in the Middle East, could still disrupt the disinflationary path. Still, her remarks were notably less hawkish than those delivered by Federal Reserve officials in Washington this week, where policymakers have signaled that persistent U.S. inflation may delay any rate cuts.

Analysts at Deutsche Bank said the ECB's posture increases the likelihood of one additional quarter-point cut before the end of 2026, though markets are no longer pricing in aggressive easing. The euro strengthened slightly against the dollar following the announcement, trading near $1.09.

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