Today, the European Central Bank (ECB) decided to keep its key interest rates unchanged. The deposit rate is 2.25%. The main refinancing rate is 2.40%, and the marginal lending rate is 2.65%.
Florian Heider, Scientific Director of the Leibniz Institute for Financial Research SAFE, comments:
“With the summer break approaching and uncertainty still elevated, the ECB has resisted the pressure to act prematurely and maintains its wait-and-see, data-dependent approach. Although inflation eased in June, the ECB has not yet achieved its price stability objective.
The remaining inflationary pressure is currently being driven mainly by higher energy prices resulting from the conflicts in the Middle East. This is a cost-push shock whose full effects can only be assessed once more data become available. The key question is whether higher energy prices will spill over into broader price and wage dynamics, creating more persistent inflationary pressure.
From today’s perspective, another rate hike in autumn appears likely. Financial markets have already priced in such a move to a large extent. Once new inflation and economic data become available after the summer, the ECB will be in a better position to assess whether the current cost shock requires a further tightening of monetary policy.”
Prof. Dr. Florian Heider
Scientific Director, Co-Director Department "Financial Intermediation"
