The European Central Bank (ECB) has stopped raising its key interest rate for the first time in 15 months and freezes interest rates. This is interpreted as a result of reflecting the somewhat eased inflation and signs of recession in some eurozone member states.
The ECB announced that it will freeze its key interest rate, which is 4.5% per year, after holding a monetary policy meeting in Athens, Greece on the 26th. The receiving interest rate and marginal loan interest rate were also maintained at 4.0% per year and 4.75% per year, respectively.
ECB freezes key rate for first time in 15 months
The ECB explains that the decision is a result of the trend of subduing eurozone prices. “The key inflation indicators are mostly easing, and interest rate hikes so far are increasingly weakening demand, helping to lower inflation,” the ECB said. The EU’s consumer price index (CPI) rose 4.3 percent last month, falling below half of last October’s 10.7 percent. It was the lowest rise in about two years.
The possibility of a recession in some member countries is also one of the factors considered by the ECB. Hamburg Commercial Bank (HCOB) Eurozone General Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 46.5 this month from 47.2 last month. It is below Reuters’ forecast of 47.4, as well as the lowest level since November 2020. Eurozone PMI is an indicator of the economic activity of European companies, and above 50 indicates a boom and below 50 indicates a slump.
“Inflation is expected to remain high for a long time, and inflationary pressures remain strong,” the ECB said, leaving room for further tightening. ECB President Christine Lagarde said in an interview with Greek private broadcaster ANT1 the day before, “[The fight against inflation] is It is not over yet, he said. “Inflation needs to be returned to 2% in the medium term.” “We are closely watching the possibility of rising oil prices due to the conflict between Israel and the Palestinian militant Hamas,” he said.