The European Central Bank (ECB) held its key interest rates unchanged following its Governing Council meeting in Frankfurt on Thursday. Accordingly, the interest rate for the deposit facility, the rates for the main refinancing operations, and the marginal refinancing operations facility remain at 2.50 percent, 2.65 percent, and 2.90 percent, respectively.
While energy prices continue to climb-a development the ECB acknowledges introduces upward risks for inflation outlooks and downward risks for growth prospects-the bank currently assesses that inflation remains largely stable, and employee wages have yet to show a noticeable reaction. However, should the energy shock persist, the associated indirect and second-round effects could drive inflation higher and dampen economic growth.
The ECB also notes that the free market appears to have already raised interest rates. The central bank observes that financing conditions have tightened since the last meeting of the ECB Council, which is expected to exert a dampening effect on both inflation and growth.
The ECB Council remains determined to tailor its monetary policy to ensure that inflation stabilizes at its target rate of 2 percent in the medium term. Furthermore, the bank stated that the Council is well-prepared to manage the current high level of uncertainty.
