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Informist, Thursday, Jul 18, 2024

--European Central Bank keeps refinance rate unch at 4.25%

--European Central Bank keeps deposit rate unch at 3.75%

MUMBAI – The European Central Bank today kept its key interest rates unchanged, in line with expectations of markets and economists.

The interest rates on the main refinancing operations, on the marginal lending facility and on the deposit facility are kept unchanged at 4.25%, 4.50% and 3.75%, respectively.

Last month, when the central bank slashed its key policy rates by 25 basis points, it said that it is not pre-committing to a particular rate path.

In June, the ECB cut the deposit interest rate by 25 bps to 3.75% for the first time since September 2019, and both the main refinancing operations rate and the marginal lending rate by 25 bps each to 4.25% and 4.50%, respectively, for the first time since March 2016.

ECB also avoided explicit guidance for the next meeting. "The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction," the bank said in a statement. 

ECB said interest rate decisions will be based on assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission.

The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation returns to its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission, the statement said.

In line with expectations, the inflationary impact of high wage growth has been buffered by profits. Monetary policy is keeping financing conditions restrictive.

Further, ECB said in the statement that domestic price pressures are still high, and services inflation is elevated, and headline inflation is likely to remain above the target well into next year.  End

Reported by Richard Fargose

Edited by Tanima Banerjee

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