The European Central Bank (ECB) left interest rates unchanged on Thursday for the first time in more than a year as the Israel-Hamas conflict spreads even more gloom over already downbeat prospects for Europe’s economy.
It is the bank’s first meeting with no change after a torrid pace of 10 straight increases dating to July 2022 that pushed its key rate to a record-high 4%.
The ECB joins the US Federal Reserve, Bank of England and others in holding borrowing costs steady — albeit at the highest levels in years — as inflation has eased.
In Europe inflation peaked at a painful 10.6% in October for the 20 countries that use the euro currency as Russia’s war in Ukraine took a toll. Those high prices have hit consumer spending, draining household finances with added costs for necessities such as food, heat and electricity.
But with inflation now down to 4.3%, the ECB held off on more rises during its meeting in Athens.
It is one of the bank’s regular meetings away from its Frankfurt headquarters, meant to underline its status as a European Union institution.
In Europe “inflation is still expected to stay too high for too long, and domestic price pressures remain strong. At the same time, inflation dropped markedly in September”, ECB president Christine Lagarde said at a news conference.
The bank said it would keep rates high enough to restrict economic activity and contain inflation “for as long as necessary.”
Ms Lagarde noted that the economy was expected to stay weak through to the end of the year, while wars in Ukraine and the Middle East could create uncertainty about the future and further hurt economic growth in Europe.
