ECB / Interest rates unchanged for the fifth consecutive meeting

They remained unchanged interest rates after today meeting of its board of directors European Central Bank.

Specifically the interest rate of the main refinancing operations as well as the interest rates on the marginal financing facility and the deposit acceptance facility remain at 4.5%, 4.75% and 4% respectively.

It is recalled that interest rates last time they increased him September of 2023 after the bull cycle that started in July 2022.

Since then and in subsequent meetings, the ECB has reiterated that interest rates would remain stable for a significant period of time in order to they contribute at reduction of inflation.

According to the ECB announcement, “the Governing Council decided today to keep the ECB’s three key interest rates unchanged. The incoming information broadly confirms the Board of Directors’ previous assessment of the medium term prospects of inflation.

” THE inflation continued to is decreasing, driven by lower food and goods price inflation. The more metrics of underlying inflation recede, the pace of wage growth moderates gradually and firms absorb some of the rise in labor costs into their profits.

” The financing conditions remain restrictive and previous interest rate hikes continue to dampen demand, helping to push inflation down. But domestic price pressures are strong and are keeping service price inflation high.

» The Board of Directors is determined to ensure that the inflation will return to the medium-term target of 2% in time. He believes that the ECB’s key interest rates are at levels that contribute significantly to the ongoing process of deflation.”

The ECB announcement in detail:

“The Governing Council decided today to keep the ECB’s three key interest rates unchanged. Incoming information broadly confirms the Governing Council’s previous assessment of the medium-term outlook for inflation. Inflation continued to decline, led by lower food and goods price inflation.

Most measures of core inflation are falling, the pace of wage growth is gradually moderating and businesses are absorbing some of the rise in labor costs into their profits. Financing conditions remain tight and past interest rate hikes continue to dampen demand, helping to push inflation down. But domestic price pressures are strong and are keeping service price inflation high.

The Governing Council is determined to ensure that inflation returns to its medium-term target of 2% in time.

He believes that the ECB’s key interest rates are at levels that contribute significantly to the ongoing deflationary process. The Board’s future decisions will ensure that its policy rates remain sufficiently restrictive for as long as necessary. If the Governing Council’s updated assessment of the inflation outlook, the dynamics of core inflation and the strength of monetary policy transmission further strengthened its belief that inflation is converging towards target in a sustained manner, it would be appropriate to reduce the current level of monetary policy tightening.

In any case, the Governing Council will continue to take an evidence-based approach and make decisions from meeting to meeting to determine the appropriate level and duration of accommodative monetary policy, and is not committed in advance to a specific course of interest rates.

Key ECB interest rates

The interest rate on the main refinancing operations as well as the interest rates on the marginal financing facility and the deposit acceptance facility will remain unchanged at 4.50%, 4.75% and 4.00% respectively.

Asset Purchase Program (APP) and Pandemic Emergency Asset Purchase Program (PEPP)

The APP portfolio is being reduced at a measured and predictable pace, as the Eurosystem no longer reinvests principal amounts from redeeming securities at maturity.

The Board of Directors intends to continue to fully reinvest the principal amounts from the redemption of securities acquired under the PEPP program upon their maturity during the first half of 2024. During the second half of the year, it intends to reduce the size of the PEPP portfolio by €7.5 billion per month on average. The Board intends to end reinvestments under the PEPP scheme at the end of 2024.

The Governing Council will continue to apply flexibility to the reinvestment of amounts from the redemption of PEPP portfolio securities as they mature in order to address risks to the monetary policy transmission mechanism related to the pandemic.

Refinancing operations

As banks repay the amounts borrowed under targeted longer-term refinancing operations, the Governing Council will regularly assess how targeted lending operations and their continued repayment contribute to the direction of its monetary policy.

The Governing Council stands ready to deploy all instruments at its disposal within the limits of its mandate to ensure that inflation returns to the 2% target over the medium term and to safeguard the smooth functioning of the monetary transmission mechanism policy. In addition, the Transmission Protection Instrument (TPI) is available to hedge against undesired, disorderly market developments that pose a serious threat to the transmission of monetary policy across euro area countries, thus allowing the Administrative Council to more effectively fulfill its mission of price stability.