The European Central Bank (ECB) announced following its Council meeting in Frankfurt that it has kept its key interest rates unchanged. Consequently, the rates for the deposit facility, the main refinancing operations, and the marginal lending facility remain at 2.25 percent, 2.40 percent, and 2.65 percent, respectively.
ECB officials noted that uncertainty remains high and the full impact of the energy shock on inflation has yet to materialize. While energy price forecasts are highly volatile, the Central Bank stated that they are currently close to the baseline scenario projected by Eurosystem experts in June, although they are significantly higher than the levels recorded before the conflict in the Middle East.
The ECB Council is closely monitoring the intensity and duration of the shock, as well as its indirect and second-round effects. The Bank emphasized its firm commitment to calibrating its monetary policy to ensure that inflation stabilizes at the target of two percent in the medium term.
The ECB affirmed that it remains well-positioned to manage the uncertainties stemming from the ongoing conflict. The determination of the appropriate monetary policy stance will depend entirely on the available data and will be made on a meeting-by-meeting basis. The Council’s decisions will be based on its assessment of inflation expectations, related risks, current economic and financial data, and the dynamics of underlying inflation and the strength of monetary transmission. Furthermore, the ECB clarified that it is not committing to a specific interest rate path in advance.
The Central Bank is prepared to adjust all instruments within its mandate to ensure inflation reaches the two percent target in the medium term and to maintain the smooth operation of monetary policy transmission. In addition, the Transmission Protection Instrument (TPI) is available to counter unjustified, disorderly market dynamics that could pose a serious threat to the transmission of monetary policy across the Eurozone, thereby enabling the ECB Council to more effectively fulfill its price stability mandate.
