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The European Central Bank (ECB) has opted to maintain interest rates unchanged for the first time in over a year, marking a shift following 10 consecutive rate hikes. The deposit facility rate remains at 4%, the interest rate on main refinancing operations at 4.5%, and the interest rate on the marginal lending facility at 4.75%. The decision comes as the effects of monetary tightening begin to manifest in the economy.
Inflation, although expected to remain persistently high, showed a significant decline in September, partly due to strong base effects. Most indicators of underlying inflation continue to weaken. The Governing Council remains committed to returning inflation to its 2% objective and will ensure that policy rates remain sufficiently restrictive as necessary, basing its decisions on incoming economic and financial data.
The ECB continues its gradual reduction of the asset purchase program (APP) portfolio, while the pandemic emergency purchase program (PEPP) principal payments will be reinvested until at least the end of 2024. The Governing Council stands ready to adjust measures within its mandate to achieve price stability and maintain the effectiveness of the monetary policy transmission mechanism.
[Information sourced from Money Review]
