ECB keeps rates unchanged at record high of 4%
The European Central Bank left interest rates unchanged for a fourth meeting as a softer outlook for inflation and economic growth bolstered expectations for cuts starting in June.
The deposit rate was kept at a record 4 per cent — as all economists surveyed by Bloomberg predicted. The Governing Council reiterated that maintaining this level of borrowing costs for “sufficiently long” will make a “substantial contribution” to returning consumer-price growth to the 2 per cent goal.
“The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction,” the ECB said Thursday in a statement. “Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages.”
Traders added to bets on monetary easing following the ECB’S announcement, now seeing a full percentage point of rate reductions in 2024 compared with about 93 basis points previously. The euro traded down 0.2 per cent at $1.0874, while the yield on 10year German debt was six basis points lower at 2.26 per cent. The ECB, like the Federal Reserve and the Bank of England, is contemplating when to sound the all-clear on inflation and begin undoing the unprecedented monetary tightening deployed to subdue it. While price growth in the 20-nation euro zone is nearing the target, policymakers there are wary of cutting too soon and want assurance that wage increases are under control.
Their latest quarterly outlook puts inflation at 2.3 per cent this year — down from 2.7 per cent in December — and revises the 2025 forecast down to 2 per cent. The economy, meanwhile, is seen expanding by 0.6 per cent in 2024 versus 0.8 per cent previously.