ECB leaves interest rates unchanged for second time

The European Central Bank (ECB) left interest rates untouched for the second time in a row on Thursday.

“The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.50%, 4.75% and 4.00% respectively,” read a statement released by the bank Thursday.

It follows after the Bank of England on Thursday held its key interest rate at 5.25% and the US central bank had also frozen borrowing costs on Wednesday.

The ECB also revised its inflation projections and expects to reach its 2% target in approximately two years.

Inflation is projected to reach 2.7% in 2024 rather than the previously projected 3.2%. In 2025, it will dip further to 2.1%, before reaching 1.9 % in 2026.

Ongoing inflation warning

Despite inflation in the eurozone slowing to a two-year low of 2.4% in November after peaking at around 10% last year, the ECB warned against overoptimism, saying it may rise again temporarily in the near term.

“Should we lower our guard? We ask ourselves that question. No, we should absolutely not lower our guard,” bank President Christine Lagarde said at a news conference.

Policymakers “did not discuss rate cuts at all, no discussion, no debate on this issue,” she said.

She said future decisions would ensure that rates “will be set at sufficiently restrictive levels for as long as necessary,” which suggests that rates will not come down in the near future.

tj/lo (Reuters, AP)