The European Central Bank decided on Thursday to keep its three key interest rates unchanged, leaving the deposit facility rate at 2.25%, the main refinancing rate at 2.40% and the marginal lending facility at 2.65%.
The bank's governing council said the outlook for energy prices, while highly volatile, currently stands close to the baseline of the Eurosystem's June staff projections and remains well above levels recorded before the conflict in the Middle East. Uncertainty remains high, the council said, and the full inflationary impact of the energy shock has yet to fully play out. It added that it will continue to closely monitor the intensity and duration of the shock, along with its indirect and second-round effects.
Thursday's decision follows a quarter-point rate increase at the ECB's previous meeting on 11 June, its first hike since 2023, which was intended to guard against inflationary pressure from higher oil prices linked to the war between the United States and Iran and the disruption to shipping through the Strait of Hormuz.
The governing council reaffirmed its commitment to setting monetary policy to ensure inflation stabilises at its 2% medium-term target, and said it remains ready to adjust all the tools at its disposal, within its mandate, to safeguard that goal and the smooth functioning of monetary policy transmission across the eurozone. It also confirmed that its Transmission Protection Instrument remains available to counter disorderly market developments that could threaten the even transmission of monetary policy across euro area countries.
As at every meeting, the council stressed it is not pre-committing to any particular rate path, and that decisions at coming meetings will continue to be based on incoming data, assessed on a meeting-by-meeting basis in light of the inflation outlook, the risks surrounding it and the underlying dynamics of inflation.
Sources: CNN, Associated Press
