European Central Bank freezes rates

The European Central Bank held interest rates steady Thursday for the first time in over a year as policymakers moved into their next phase of fighting inflation amid signs the region's economy has weakened.

Officials have shifted their focus to how long they will need to maintain high interest rates in order to push inflation all the way down to the central bank's target. The bank, which sets rates for the 20 countries that use the euro, kept the deposit rate at 4%, a record high.

“Inflation is still expected to stay too high for too long, and domestic price pressures remain strong,” Christine Lagarde, the president of the central bank, said at a news conference in Athens, Greece. “At the same time, inflation dropped markedly” last month and some measures of inflation, which would indicate persistence, have eased, she said.

The decision to hold interest rates was telegraphed last month when, after their 10th consecutive increase, policymakers signaled they might be done. The annual rate of inflation in the eurozone dropped to 4.3% in September, from a peak of 10.6% a year ago. But the rate isn't forecast to return to the central bank's 2% target until the third quarter of 2025, the central bank's staff projected last month. Core inflation, which strips out volatile food and energy prices, slowed to 4.5% last month.

Since July 2022, the European Central Bank has enforced its most aggressive bout of monetary tightening to prevent high inflation taking hold, which was triggered by a surge in energy prices last year. Interest rates were raised from below zero to the highest in the central bank's two-decade history, and bond-buying programs introduced to stimulate the economy have been shrunk.