After Federal Reserve, European Central Bank maintains steady key interest rates

Updated : Dec 15, 2023 11:21
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Editorji News Desk

The European Central Bank (ECB) opted to maintain its current interest rates for the second consecutive meeting, coinciding with similar decisions from other major central banks like the US Federal Reserve, Bank of England, and Swiss National Bank, all choosing to keep rates unchanged.

Although the ECB emphasized maintaining sufficiently restrictive policy rates, it shifted its stance on inflation, foreseeing a gradual decline next year instead of expecting it to persist at high levels for an extended period.

Revised macroeconomic projections revealed slightly tempered growth forecasts for the coming years, with real GDP expansion estimates adjusted downward, indicating more subdued economic growth. Likewise, the ECB adjusted its inflation forecasts, acknowledging sustained elevated domestic price pressures, particularly in labor costs.

Highlighting tightened financing conditions as a means to curb inflation, the ECB anticipates a sluggish short-term economic outlook but foresees a recovery driven by increased real incomes and improved foreign demand.

Maintaining its key rate at a historic high of 4%, the ECB announced the completion of reinvestments under its pandemic emergency purchase program (PEPP) by the end of 2024. The gradual reduction of the PEPP portfolio aims to pave the way for the normalization of the Eurosystem's balance sheet.

According to CNBC report, market analysts expressed surprise at the timing of the PEPP announcement, suggesting potential implications for future rate debates.

ECB

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