The ECB maintains the reference interest rate

The European Central Bank (ECB) decided yesterday to keep the reference interest rate unchanged and did not give any indication of the next move, according to Reuters.

"The Board of Governors decided today (n.r. yesterday) that the three representative interest rates of the ECB remain unchanged. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at the levels of 4.25%, 4.50%, and 3.75%, respectively," the published press release states at the end of the ECB Governing Council meeting.

The data published on Wednesday by the European Statistical Office (Eurostat) show that the annual inflation rate in the European Union stood at 2.6% in June, down from 2.7% in May. Compared to May 2024, the annual inflation rate decreased in 17 member states, including Romania, from 5.8% to 5.3%, remained stable in one country and increased in nine member states, notes Agerpres.

"The new information broadly supports the Governing Council's previous assessment of the medium-term inflation outlook", the ECB management states, noting: "Although some measures of core inflation registered a slight increase in May, as a result of some factors cyclical, most measures either remained stable or were marginally reduced in June. In accordance with expectations, the inflationary impact of the significant increase in salary earnings was amortized by profits. Monetary policy maintains restrictive financing conditions. At the same time, internal inflationary pressures are still intense, the dynamics of service prices is alert and it is likely that total inflation will remain above the target for a good part of next year".

Regarding the future direction of its monetary policy, the ECB mentioned that its decisions will be guided by the data to be published.

"The Board of Governors will continue to take a data-driven and meeting-by-meeting approach to determine the level of restrictiveness and the appropriate duration of its application. Specifically, its interest rate decisions will be based on its assessment of the outlook for inflation in light of new economic and financial data, the dynamics of core inflation and the robustness of monetary policy transmission. The Governing Council does not assume any prior commitment regarding a certain trajectory of interest rates", the ECB leadership emphasized.

After the monetary policy meeting, ECB President Christine Lagarde said: "The ECB's next monetary policy meeting will be one open to all options, even though policymakers will have significantly more information to decide whether further tapering is called for of interest. The question "what will we do in September" is a wide open one and will be decided on the basis of all the data we will receive. We do not pre-commit to a particular trajectory."

The President of the ECB also said that the institution's officials studied the three crucial elements that underlie the inflation outlook: wage growth, company profit margins and productivity; and "will have much more data available in the coming weeks and months."

"If these data will confirm that the disinflationary process continues, this will strengthen our confidence that the growth rate of consumer prices will return to the target of 2% at the end of 2025, as is currently expected," said Lagarde.