The European Central Bank (ECB) announced that it has extended its interest rate pause, keeping its primary key interest rate at 2.0 percent. At its policy meeting in Frankfurt, the bank confirmed that the deposit facility rate remains unchanged at 2.00 percent, while the rates for the main refinancing operations and the marginal lending facility remain at 2.15 percent and 2.40 percent, respectively.
The ECB Council stated its commitment to ensuring that inflation stabilizes at its medium-term target of two percent. However, the bank noted that energy prices have risen sharply due to the war in the Middle East, driving up inflation and placing a strain on the general economic climate. The institution cautioned that the long-term impact of the conflict on inflation and economic activity will depend on the intensity and duration of the energy price shock, as well as its secondary effects.
Despite the challenges, the ECB conveyed confidence that it remains well-positioned to manage current uncertainties. Bank officials pointed out that when the Euro area began facing steeply rising energy costs, inflation was already close to the two percent target. They highlighted the remarkable resilience of the economy over recent quarters, and confirmed that long-term inflation expectations remain firmly anchored. However, they did specify that short-term inflation expectations have risen considerably.
Looking ahead, the Council pledged to maintain a closely monitoring approach, adhering to a strictly data-driven policy. Decisions on future monetary course will be made on a meeting-by-meeting basis. Specifically, interest rate decisions will depend on a comprehensive review of inflation outlooks and associated risks, current economic and financial data, the dynamics of underlying inflation, and the strength of the monetary transmission mechanism. The ECB emphasized that it will not pre-commit to any specific interest rate path.
