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ECB rate cuts remain elusive as inflation pressure wanes
Time:2024-05-21 11:07:15 Source:travelViews(143)
FRANKFURT, March 8 (Xinhua) -- The European Central Bank (ECB) on Thursday decided at a rate-setting meeting to leave key interest rates unchanged and gave nothing away about the timing of its stance change. The central bank keeps key interest rates at a historic high in view that it is still on course to bring the medium-term inflation back to its target range. 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 4.5 percent, 4.75 percent and 4 percent respectively, said the ECB in a statement. "Financing conditions are restrictive and our past interest rate increases continue to weigh on demand, which is helping push down inflation," it said. In one of its most aggressive rate hiking cycles in history, the ECB lifted key interest rates by a total of 450 basis points since July 2022. As a result, the borrowing costs in the euro area went up dramatically, which dampened loan demand and investment. The central bank disclosed that lending rates remain elevated at 5.2 percent for business loans and 3.9 percent for mortgages. The high interest rates, coupled with high inflation, are eroding profitability of companies. Inflation in the euro area declined to 2.6 percent in February from 2.8 percent in January, according to the statistical office of the European Union. The central bank confirmed that most measures of underlying inflation declined further in January. In its March projections, the ECB lowered inflation forecast to 2.3 percent in 2024 and 2 percent in 2025. Previously, it expected inflation to be 2.7 percent in 2024 and 2.1 percent in 2025. Meanwhile, ECB President Christine Lagarde reiterated that bringing down inflation to its target level remains the top priority and the job is not done yet. The central bank also cut its economic growth forecast from 0.8 percent to 0.6 percent in 2024 in its March projections. At the same time, it remains steadfast that the economic growth will pick up momentum, with 1.5 percent expected in 2025 and 1.6 percent in 2026. "The just-published policy announcement shows that now is not the time for rate cuts and that -- at least in its official communication -- the ECB is resisting the temptation to send any new signals regarding upcoming rate reductions," said Carsten Brzeski, ING Germany's chief economist. According to Brzeski, the "gradual reversal of rate hikes" will start in June since the central bank still needs to have more data to make sure the inflation has been tamed.
(Editor:Wang Su)
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