The Governing Council of European Central Bank on Thursday decided to make no change to the three key interest rates. Inflation remains close to the 2 per cent medium-term target and the Governing Council’s assessment of the inflation outlook is broadly unchanged. The economy has continued to grow despite the challenging global environment.
The interest rates on the deposit facility, the main refinancing operations, and the marginal lending facility will remain unchanged at 2.00 per cent, 2.15 per cent, and 2.40 per cent respectively.
In a press release, the European Central Bank (ECB) says that the robust labour market, solid private sector balance sheets, and the past interest rate cuts remain important sources of resilience. According to ECB, however, the outlook is still uncertain, owing particularly to ongoing global trade disputes and geopolitical tensions.
Inflation target as key factor
The ECB’s Governing Council is determined to ensure that inflation stabilises at its 2 per cent target in the medium term. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path.
The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises at its 2 per cent target in the medium term and to preserve the smooth functioning of monetary policy transmission. Moreover, the Transmission Protection Instrument is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries, thus allowing the Governing Council to more effectively deliver on its price stability mandate.
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