The Zhitong Finance App learned that the ECB announced on Thursday that it will keep the deposit mechanism interest rate, main refinancing interest rate, and marginal loan interest rate unchanged at 2.50%, 2.65%, and 2.90%, respectively, in line with market expectations. The ECB said in a statement that the continued rise in energy prices poses an upward risk to the inflation outlook and a downside risk to the growth outlook.
The ECB said that although the full impact of the energy shock is still showing, potential inflation has remained generally stable so far, and there has been no substantial reaction in wages. However, the increase in the scale and duration of energy shocks, as well as the impact on indirect effects and second-round effects, may drive up inflation and depress growth. Financing conditions have been tightened since the last meeting and are expected to put pressure on inflation and growth.
The ECB has reiterated that it will ensure that inflation stabilizes at the target level of 2% in the medium term. The Management Committee stated that it is still capable of dealing with the current high level of uncertainty and will continue to determine an appropriate monetary policy position by relying on data and evaluating each meeting. Specifically, rate decisions will be based on an assessment of inflation prospects and related risks, combined with the latest economic and financial data, potential inflation dynamics, and monetary policy transmission strength. The Management Committee emphasized that no specific interest rate path will be promised in advance.
In terms of asset purchases, the ECB said that as the Eurozone central bank no longer reinvests principal in maturing securities, the asset purchase plan (APP) and emergency asset purchase plan (PEPP) combination is declining at a controlled and predictable rate.
The ECB also stated that it is ready to adjust all instruments within its scope of responsibility to ensure that inflation stabilizes at the target level of 2% in the medium term and maintains the smooth transmission of monetary policy. Furthermore, if unfounded and disorderly market fluctuations occur, and such fluctuations seriously threaten the transmission of monetary policy in Eurozone countries, “transmission protection instruments” (TPI) can be used to deal with them, thereby helping the Management Committee to carry out the mission of price stability more effectively.
ECB President Lagarde will hold a press conference at 9:45 Beijing time to comment on the considerations behind this decision. Just a few hours ago, Lagarde announced that he would step down in February 2027. His term of office was originally scheduled to end in October 2027.
Traders have slightly reduced their bets on further ECB rate hikes, and are expected to be tightened by a total of 70 basis points by the end of 2027, which is lower than the 72 basis points previously anticipated. The euro's decline widened and fell to $1.1111, a 17-month low.