ECB Leaves Interest Rates Unchanged

18 July 2024

By Isabel Teles – FRANKFURT (Econostream) – The European Central Bank’s Governing Council on Thursday decided to keep its three key interest rates unchanged, as widely expected by markets and analysts.

‘The incoming information broadly supports the Governing Council’s previous assessment of the medium-term inflation outlook’, the ECB said in a press release. ‘Monetary policy is keeping financing conditions restrictive. At the same time, domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year.’

The three key ECB interest rates remain unchanged from June at 4.25% for main refinancing operations, 4.50% for the marginal lending facility, and 3.75% for the deposit facility.

Some measures of underlying inflation ticked up in May, while most were stable in June, the ECB said. The ‘inflationary impact of high wage growth has been buffered by profits', it said.

Domestic pressures remained elevated and headline inflation was ‘likely to remain above the target well into next year’, the ECB said.

Interest rates would be kept ‘sufficiently restrictive for as long as necessary’ to reach the 2% inflation target in a timely manner, the ECB said, and the data-dependent, meeting-by-meeting approach would continue to be followed in future decisions.

The APP portfolio was declining as foreseen, according to the press release.

The Governing Council would be ready to adjust all of its instruments to ensure the timely return to the inflation target and the functioning of monetary policy transmission, the ECB said, highlighting the Transmission Protection Mechanism (TPI).

‘Moreover, the Transmission Protection Instrument is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries, thus allowing the Governing Council to more effectively deliver on its price stability mandate’, the ECB said.