The European Central Bank has halted its pattern of increasing interest rates.
The governing council of the ECB has decided to keep its benchmark interest rates at the same level during their meeting in Athens today.
The deposit rate set by the ECB for commercial bank deposits remains at 4%, which is the highest it has been since the introduction of the euro in 1999.
The rate for the main refinancing operations, which determines the weekly cost of borrowing for commercial banks, remained at 4.5%. The rate for the marginal lending facility, which provides overnight credit to banks, also remained unchanged at 4.75%.
At this time, the determination concludes a series of 10 increases in interest rates.
In July 2022, the ECB began increasing interest rates for the first time in ten years due to the impact of the Ukraine conflict on the cost of energy and food.
Inflation in the Eurozone decreased to 4.3% last month, dropping from 5.2% in August. This provides some optimism that the pressure of inflation is starting to ease.
The choice was made following the release of recent data indicating a decrease in the strength of the eurozone economy. According to a survey of purchasing managers, there has been a significant decline in business activity, the largest since the beginning of the Covid-19 outbreak.
The ECB has announced its decision, stating:
Today, the Governing Council has chosen to maintain the current levels of the three primary interest rates set by the ECB.
The recent data has largely reaffirmed their earlier prediction for inflation in the medium-term. Inflation is predicted to remain excessive for an extended period, and there are still strong domestic price influences.
In September, inflation decreased significantly, primarily due to strong base effects. The majority of indicators for underlying inflation have also shown a decrease. The effects of the Governing Council’s previous interest rate increases are still being strongly felt in financing conditions. This is contributing to a decrease in demand, which in turn is helping to lower inflation.
As mentioned in her previous remarks.
In a previous post, it was mentioned that recent economic data has upheld the ECB’s previous prediction for medium-term inflation. However, it is still expected that inflation will remain excessively high for an extended period of time.