ECB Leaves Interest Rates Remain Unchanged But Suggests This Could Change Soon

11 April 2024

By Isabel Teles – FRANKFURT (Econostream) – The European Central Bank’s Governing Council on Thursday decided again to keep its three key interest rates unchanged, as widely expected by markets and analysts, but suggested that a reduction would soon be appropriate.

‘Inflation has continued to fall, led by lower food and goods price inflation… But domestic price pressures are strong and are keeping services price inflation high’, the ECB said in a press release published on its website.

The three key ECB interest rates remain unchanged at 4.5% for main refinancing operations, 4.75% for the marginal lending facility, and 4% for the deposit facility.

Without the reinvestment of the principal payments from maturing securities, the APP portfolio was declining at a predictable pace, the ECB said.

‘The Governing Council will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism related to the pandemic’, the ECB said.

Data would continue to guide the Governing Council’s decisions, especially regarding the inflation outlook, underlying inflation and monetary policy transmission, the press release said.

‘If the Governing Council’s updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase its confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction’, the ECB said.