Several of the ECB’s board members have declared that borrowing costs will remain elevated for a long time
The European Central Bank decided to keep interest rates unchanged after ten consecutive increases.
As announced after the Governing Council meeting held in Athens, the ECB is keeping its key interest rate unchanged at 4%, as the signals from the inflation front are encouraging. Specifically, as stated in the announcement, the latest data broadly confirmed the ECB’s previous assessment of the medium-term outlook for inflation. Inflation is still expected to remain too high for too long and domestic price pressures remain strong. At the same time, inflation eased markedly in September, partly due to strong base effects, and most measures of core inflation continued to ease.
In any case, the ECB’s Governing Council says it remains ready to deploy all the tools at its disposal as part of its mandate to ensure that inflation returns to the 2% target over the medium term and to maintain the smooth functioning of the monetary policy transmission. .
Today’s brake on interest rate hikes was decided after the eurozone’s two main price indices slowed further and economic conditions worsened for the 20 member states, which face the risk of a recession in the second half of the year as more expensive borrowing squeezes household and business budgets.
However, several ECB board members have signaled that borrowing costs will remain elevated for a long time to bring inflation back towards the 2% target. While many are warning of further monetary tightening should tensions in the Middle East spill over into energy prices, some analysts warn that interest rate cuts may be needed before next autumn.
