The ECB maintains rates at 4.5% for the third consecutive meeting

On Thursday, the Governing Council of the European Central Bank (ECB) made the decision to keep interest rates unchanged. This means that the reference rate for its refinancing operations will remain at 4.50%, while the deposit rate and loan facility will both stay at 4% and 4.75% respectively.

This marks the third consecutive meeting in which the ECB has maintained interest rates, following a series of ten consecutive increases in the price of money. These tightening measures had pushed rates to their highest level in over two decades but were halted at the October meeting.

The ECB had raised rates by 450 basis points during this cycle, which began in July 2022. However, there is speculation in the markets that the ECB may now lower the reference rate, potentially happening this summer, according to analysts at Bank of America.

The ECB’s decision comes in light of the euro zone’s annual inflation rate of 2.9% in December. This is a half a percentage point increase from the previous month and the highest reading since October. However, after excluding energy, food, alcohol, and tobacco from the calculation, the underlying rate decreased to 3.4%.

Additionally, Eurostat confirmed that the eurozone’s GDP contracted by 0.1% in the third quarter compared to the previous three months, when it had expanded by 0.1%. This performance was worse than that of the United States, where GDP increased by 1.3% quarterly, and aligns with the United Kingdom, which also experienced a 0.1% decrease in the third quarter.