The ECB sticks to the script and keeps rates at 4.5% for the fourth consecutive meeting

The Governing Council of the European Central Bank (ECB) decided this Thursday to maintain interest rates, so that the reference rate for its refinancing operations will remain at 4.50%, while the deposit rate will remain at 4% and the loan facility at 4.75%.

In this way, the issuing institute leaves rates intact for the fourth consecutive meeting since it stepped on the brakes at its October meeting, after undertaking ten consecutive increases in the price of money, which placed it at its highest level in more than 20 years.

The ECB has stated that interest rates “are at levels that, if maintained for a sufficiently long period, will contribute substantially” to returning inflation to the 2% target.

The ‘guardian of the euro’ had raised rates by 450 basis points during the hike cycle that began in July 2022, although now the markets are betting that the ECB will lower the reference rate in the summer.

The ECB will continue to apply “a data-dependent approach” to determine the appropriate level of tightening and duration of monetary policy. In particular, the inflation outlook will be assessed taking into account incoming economic and financial data, the dynamics of underlying inflation and the intensity of monetary policy transmission. “Future decisions of the Governing Council will ensure that interest rates officials are set at sufficiently restrictive levels for as long as necessary,” stressed the entity led by Christine Lagarde.

The ECB’s decision comes after the year-on-year inflation rate in the euro zone was 2.6% in February, two tenths below the price increase registered in the previous month. By excluding the impact of energy, food, alcohol and tobacco from the calculation, the underlying rate also moderated by two tenths, to 3.1%. This reading was the lowest since March 2022.

In addition, Eurostat confirmed that the eurozone’s GDP avoided recession after registering stagnation in the fourth quarter compared to the previous three months, when it contracted by 0.1%.

In the case of the large EU economies, Germany recorded a contraction of 0.3% in the fourth quarter, after stagnating between July and September, while France repeated the paralysis of the previous three months, and Italy accelerated its expansion by 0.2% from 0.1% in the third quarter. Spain, with an expansion of 0.6% from 0.4%, was once again the large economy with the best evolution.

The performance of the eurozone economy between October and December was significantly worse than that observed in the United States, where GDP increased by 0.8% quarterly, although it was more positive than the performance of the United Kingdom, which entered a technical recession after lose 0.3% in the last quarter of 2023 and drop 0.1% during the third.