European Central Bank

The Governing Council of the European Central Bank (ECB) on Thursday (today) decided to keep its key interest rates unchanged, saying it is “determined” to bring inflation back to its two per cent medium-term target.

It said that the ECB rates are “at levels that are making a substantial contribution to the ongoing disinflation process.”

In a statement announcing the decision, the ECB said that economic information has “broadly confirmed the Governing Council’s previous assessment of the medium-term inflation outlook.

“Inflation has continued to fall, led by lower food and goods price inflation. Most measures of underlying inflation are easing, wage growth is gradually moderating, and firms are absorbing part of the rise in labour costs in their profits. Financing conditions remain restrictive and the past interest rate increases continue to weigh on demand, which is helping to push down inflation. But domestic price pressures are strong and are keeping services price inflation high.”

It warned against any hopes that it will loosen monetary conditions any time soon, saying that its future decisions “will ensure that its policy rates will stay sufficiently restrictive for as long as necessary.”

The Governing Council made it clear that only significant changes to the dynamics of underlying inflation and the strength of monetary policy transmission could increase its confidence that inflation is reducing in a sustained manner. Only if these conditions are satisfied, it said, would it be appropriate to reduce the current level of monetary policy restriction.

“In any event, the Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction, and it is not pre-committing to a particular rate path.”

Therefore, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.50 per cent, 4.75 per cent and four per cent respectively.

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