The Governing Council of the European Central Bank (ECB) has decided to maintain the three key ECB interest rates. This decision was based on data that "broadly" confirms a continuing decline in the medium-term inflation outlook, aligning with a previous assessment suggested to the council.
A press release from the ECB indicates that the interest rates on the main refinancing operations, marginal lending facility, and deposit facility will remain at 4.50%, 4.75%, and 4.00% respectively.
The same press release reveals that most measures of underlying inflation are easing, wage growth is slowly moderating, and businesses are absorbing some of the increased labor costs in their profits. However, financing conditions remain tight and previous interest rate hikes continue to exert pressure on demand. This, as pointed out by the ECB, results in downward pressure on inflation. The central bank also recognized that strong domestic price pressures are maintaining high services price inflation.
In a press conference held on April 11, ECB President Christine Lagarde stated that inflation has declined from an annual rate of 2.6% in February to 2.4%, citing an estimate from Eurostat in March. Food price inflation decreased to 2.7% in March from 3.9% in February while energy price inflation stood at -1.8% in March compared to -3.7% in February. Goods price inflation dropped to 1.1% in March from 1.6% in February; however, services price inflation remains high at 4%.
Lagarde emphasized their commitment during her speech: "We are determined to ensure that inflation returns to our two per cent medium-term target in a timely manner. We consider that the key ECB interest rates are at levels that are making a substantial contribution to the ongoing disinflation process. Our future decisions will ensure that our policy rates will stay sufficiently restrictive for as long as necessary."