The European Central Bank (ECB) Governing Council has kept three key ECB interest rates unchanged. It based its decision on information that “broadly” confirms the medium-term inflation outlook continues to fall, as a previous assessment had suggested to the council.
According to an ECB press release, the interest rates on the main refinancing operations, marginal lending facility, and deposit facility remain at 4.50%, 4.75%, and 4.00%, respectively.
The ECB said that most measures of underlying inflation are easing, wage growth is slowly moderating, and businesses are absorbing some of the increased labor costs in their profits. However, financing conditions remain tight, and previous interest rate hikes continue to put pressure on demand, which, the ECB points out, puts downward pressure on inflation. The central bank also acknowledged that strong domestic price pressures are keeping services price inflation high.
According to statements made by ECB President Christine Lagarde at a press conference on April 11, inflation has declined from an annual rate of 2.6% in February to 2.4%, citing an estimate from Eurostat in March. Food price inflation decreased to 2.7% in March, from 3.9% in February. Energy price inflation stood at -1.8% in March, compared to -3.7% in February. Goods price inflation dropped to 1.1% in March, from 1.6% in February. But services price inflation continues to be high, at 4.0%.
“We are determined to ensure that inflation returns to our two per cent medium-term target in a timely manner. We consider that the key ECB interest rates are at levels that are making a substantial contribution to the ongoing disinflation process. Our future decisions will ensure that our policy rates will stay sufficiently restrictive for as long as necessary,” Lagarde said.
