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ECB interest rates unchanged again, but pictures future cuts

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The European Central Bank (ECB) remained unchanged on Thursday, but announced that slowing inflation could open the door to easing monetary policy, raising hopes for a first rate cut next June.

This is the fifth consecutive time the Central Bank has frozen borrowing costs, with the key deposit rate at an all-time high of 4%.< /p>

As announced by the ECB, the interest rate on the main refinancing operations as well as the interest rates on the marginal financing facility and the deposit acceptance facility will remain unchanged at 4.50%, 4.75% and 4.00% respectively.

The ECB had raised interest rates at a record pace to tame feverish price rises, but calls have grown to start a rate-cutting cycle as inflation eases and higher borrowing costs weigh on the 20-nation single currency zone .

Eurozone inflation slowed more than expected in March to 2.4% – not too far from the ECB's 2% target.

A cut on Thursday was widely seen as unlikely, with officials repeatedly stressing they were waiting for more data to be available only at their meeting on June.

In its announcement, the ECB refined its language, saying most measures of core inflation are easing and wage growth – a particular concern in recent months – “moderating”.

Specifically, the ECB reports that “inflation continued to decline, led by lower food and goods price inflation”.

“Most measures of core inflation are easing, the pace of wage growth is gradually moderating and businesses are absorbing some of the rise in labor costs into their profits,” he adds.

He also says that “financing conditions remain tight and previous interest rate hikes continue to dampen demand, helping to push inflation down.”

However, the ECB says “domestic price pressures are strong and sustaining price inflation of services at high levels”.

Also, in the announcement, the ECB states that its Governing Council is “determined to ensure that inflation returns to the medium-term objective of 2% in time”.

“It considers the ECB's key interest rates to be at levels that contribute significantly to the ongoing deflationary process,” it says, adding that “the Governing Council's future decisions will ensure that its policy rates remain sufficiently restrictive for as long as period deemed necessary”.

source: In Business News

Source: 24h.com.cy

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