ECB, Lagarde Postpones Rate Cut
Rates are confirmed at 4.5% for the third time after ten consecutive increases
The European Central Bank left the interest rate without change at 4.5%. Specifically, the prime refinancing rate remains unchanged at 4.50%, the deposit rate at 4%, and the margin loan rate at 4.75%. This is the third time Europe’s top monetary authority has left untouched the value of money after ten consecutive increases.
“The new information essentially confirmed its previous assessment of the medium-term inflation outlook,” the ECB said in a note. “In addition to the effect of the base increase on overall energy-related inflation, the downward trend in core inflation has continued, and past interest rate increases still weigh heavily on financing conditions. Restrictive financing conditions slow demand, helping to reduce inflation.”
The Council’s objective is to return inflation to a “physiological” level of 2%, and keeping benchmark interest rates at these levels “for a sufficiently long period” will achieve this goal.
“The consensus in the Governing Council was that it is premature to discuss rate cuts,” explained ECB President Christine Lagarde, indicating that there is no specific timetable for a possible reduction in the cost of money, but that data will be taken into account. Lagarde also explained that the eurozone economy will stagnate in the last quarter of 2023 and stay weak in the first quarter of 2024, with some indicators pointing to a possible recovery in the following months.
Inflation fell to 2.9% in December and is expected to continue to fall in 2024. The international scenario characterized by the conflicts in Ukraine and the Middle East continues to be a cause for concern.