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Financial News: ECB Leaves Key Interest Rates Unchanged, Cuts EZ

ECB Leaves Key Interest Rates Unchanged, Cuts EZ Forecast

03/07/2024 - 09:14:00 (RTTNews)

(RTTNews) - The European Central Bank left the key interest rates unchanged on Thursday and lowered both the inflation and growth forecast for the euro area for this year.

The Governing Council, led by ECB President Christine Lagarde, maintained the main refinancing rate, or refi, at 4.50 percent, as expected.

The deposit facility rate was left unchanged at a record high 4.00 percent and the lending rate was retained at 4.75 percent. The ECB also released the latest staff projections that revealed downgrades to both inflation and growth forecasts for Eurozone.

The downward revision for this year was largely due to lower energy prices. ECB Staff now project inflation to average 2.3 percent this year, 2.0 percent in 2025 and 1.9 percent in 2026.

Core inflation that excludes energy and food is projected to average 2.6 percent this year, 2.1 percent in 2025 and 2.0 percent in 2026.

"Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages," the bank said.

As higher interest rates damp demand, the economic activity is expected to remain subdued in the near term. The ECB Staff lowered the growth projection for this year to 0.6 percent. Growth is expected to come in at 1.5 percent next year and 1.6 percent in 2026, supported initially by consumption and later also by investment, the ECB said. The ECB reiterated the Governing Council's is determined to ensure that inflation returns to its 2 percent medium-term target in a timely manner. "Based on its current assessment, the Governing Council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal," the bank said.

"The Governing Council's future decisions will ensure that policy rates will be set at sufficiently restrictive levels for as long as necessary."

The central bank also asserted that policymakers would continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.

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