ECB leaves interest rates unchanged at 4.5%

October 26, 2023 (MLN): European Central Bank (ECB) in its meeting held on October 26 kept the benchmark refinancing interest rate unchanged at 4.5%.

This marks the first time the central bank has decided to keep its interest rates unchanged after a 15-month streak of rate hikes.

The decision came largely in line with the market’s expectations, wherein the market participants were expecting a rate pause.

As per the monetary policy statement issued on the same day, the Governing Council today decided to keep the three key ECB interest rates unchanged.

Accordingly, the interest rates on the marginal lending facility and the deposit facility will also remain unchanged at 4.75% and 4% respectively, along with the main benchmark refinancing rate.

The incoming information has broadly confirmed its previous assessment of the medium-term inflation outlook.

Inflation is still expected to stay too high for too long, and domestic price pressures remain strong.

At the same time, inflation dropped markedly in September, including due to strong base effects, and most measures of underlying inflation have continued to ease.

The Governing Council’s past interest rate increases continue to be transmitted forcefully into financing conditions.

This is increasingly dampening demand and thereby helps push down inflation.

The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner.

Based on its current assessment, the Governing Council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal.

The Governing Council’s future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary.

The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.

In particular, the Governing Council’s interest rate decisions will be based on its 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.

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