The European
Central Bank (ECB) kept its main refinancing rate unchanged at 4.50 per cent on
Thursday, as widely expected. The ECB’s interest rates on the marginal lending
facility and the deposit facility were also left unchanged at 4.75 per cent and
4.00 per cent, respectively. It was the ECB’s fourth consecutive meeting on
hold. In its policy
statement, the ECB noted:
- ECB staff
revised downwardly its projections for inflation, in particular for 2024, mainly to a
lower contribution from energy prices. Inflation is now projected to average 2.3%
in 2024, 2.0% in 2025 and 1.9% in 2026;
- Projections
for inflation excluding energy and food were also revised down to 2.6% for
2024, 2.1% for 2025 and 2.0% for 2026;
- 2024 growth
projection was also revised down to 0.6%, with economic activity seen to remain
subdued in the near term. Eurozone's economy is expected to pick up and grow at
1.5% in 2025 and 1.6% in 2026;
- Although most
measures of underlying inflation have eased further, domestic price pressures
remain high, in part owing to strong growth in wages;
- Financing
conditions are restrictive and the past interest rate increases continue to
weigh on demand, which is helping push down inflation;
- Governing
Council is determined to ensure that inflation returns to its 2% medium-term
target in a timely manner;
- Governing
Council considers that key ECB interest rates are at levels that, maintained
for a sufficiently long duration, will make a substantial contribution to this
goal;
- Governing
Council’s future decisions will ensure that policy rates will be set at
sufficiently restrictive levels for as long as necessary;
- Governing
Council will continue to follow a data-dependent approach to determining the
appropriate level and duration of restriction;
- Governing
Council stands ready to adjust all of its instruments within its mandate to
ensure that inflation returns to its 2% target over the medium term and to
preserve the smooth functioning of monetary policy transmission