At its meeting today, the Governing Council of the ECB decided not to raise interest rates further. The interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility will therefore remain at 4.5 percent, 4.75 percent, and 4.00 percent, respectively. Florian Heider, Scientific Director of the Leibniz Institute for Financial Research SAFE, comments on this decision:
“The ECB has maintained its monetary policy course, which was already evident in the decision of the September meeting. The interest rate plateau has thus been reached for the time being. With the gradual interest rate hikes so far, the ECB has shown that it takes fighting inflation in the euro area seriously. There are three key reasons why interest rates have now reached a plateau: core inflation in the euro area has recently fallen to 4.5 percent, there has been no new data to suggest that inflation is about to flare up again, and the escalation of violence in the Middle East, in addition to the ongoing war in Ukraine, is creating additional global uncertainty.
We also see a tightening effect on interest rates in the international financial markets due to the repricing of long-term US government bonds. The ECB will have taken this into account in its decision today. With the temporary end of interest rate hikes, the ECB enters the next important phase in its fight against inflation.”