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E-mail Xinhua, July 19, 2024
This photo taken on July 27, 2023 shows the Euro sign in Frankfurt, Germany. [Photo/Xinhua]
The European Central Bank (ECB) on Thursday decided to leave key interest rates unchanged at its regular rate-setting meeting as inflation in the eurozone appears to be sticky, remaining persistent despite efforts to curtail it.
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 4.25 percent, 4.5 percent and 3.75 percent respectively, which are still close to historically high levels.
ECB President Christine Lagarde told a press conference that the decision was unanimous among the governing council members.
The last two months saw some fluctuations of inflation in the single-currency block. The central bank confirmed that most inflation measures were either stable or edged down in June while some measures of underlying inflation ticked up in May.
"The incoming information broadly supports our previous assessment of the medium-term inflation outlook," said an ECB statement.
Annual inflation in the eurozone dropped slightly to 2.5 percent in June from 2.6 in May. In spite of the decrease, the central bank still considers domestic price pressures high and services inflation elevated. Headline inflation is likely to remain above targets well into next year.
The ECB remains on high alert given the resilient inflation. "We are determined to ensure that inflation returns to our two per cent medium-term target in a timely manner. We will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim," it said on Thursday.
In a major policy shift, the ECB moved to cut interest rates by 25 basis points in June, its first rate cut since September 2019.
The rate cut was widely considered as a tentative step taken by the ECB to depart from its restrictive monetary policy, which was characterized by a cycle of aggressive rate hikes, reaching record highs.
Lagarde stressed on Thursday that the ECB is not pre-committing to a particular rate path. The central bank also clarified that it is not in a rush to wind down the restrictive policies.
Lagarde added that the central bank will wait for additional data in the coming weeks and months to confirm "the disinflationary process that is at work at the moment."
Unlike past easing cycles that were triggered by recessions or crises, any further rate cuts by the ECB "will not be on autopilot," noted ING economist Carsten Brzeski.
Meanwhile, the weakening economic momentum, stubbornly high domestic inflation and a risk of elevated wage growth will diminish the prospect of another rate cut in September, as market participants already expect, Brzeski argued.
