ECB leaves interest rates unchanged; deposit rate remains at 2.50 per cent. ‘Upward risks to inflation’

The ECB has left interest rates unchanged: the deposit rate remains at 2.50 per cent, the main refinancing rate at 2.65 per cent and the marginal lending rate at 2.90 per cent. The central bank announced this in a statement. The decision was widely anticipated by investors.

“The Governing Council remains well placed to deal with the current high level of uncertainty. It will adopt a data-driven approach, assessing the situation on a meeting-by-meeting basis to determine the appropriate monetary policy stance. In particular, the Governing Council’s decisions on interest rates will be based on its assessment of the inflation outlook and the risks surrounding it, in the light of incoming economic and financial data, as well as core inflation dynamics and the effectiveness of transmission.” This is according to a statement issued by the ECB accompanying its decision.

‘Energy prices have continued to rise, creating upside risks to the inflation outlook and downside risks to the growth outlook. Although the full effects of the energy shock have not yet materialised, core inflation has remained broadly stable so far and, at this stage, wages are not showing any significant reaction. The increase in the magnitude and duration of the energy shock, as well as its implications in terms of indirect and second-round effects, could lead to higher inflation and a slowdown in growth. Financing conditions have tightened since the Governing Council’s last meeting, which could weigh on inflation and growth. The Governing Council is committed to conducting monetary policy aimed at ensuring that inflation stabilises at its 2% target over the medium term.”