The European Central Bank (ECB) decided to keep its rates unchanged on Thursday October 26, after ten increases in a row, a necessary and expected pause while it assesses the impact of monetary tightening at a time when inflation is slowing in eurozone. The main key rate remunerating deposits, the benchmark for credit in the euro zone, was thus maintained at its historically high level of 4%, which it had reached in September.
“Inflation fell sharply in September”noted the ECB at the end of its meeting held outside the walls in Athens, specifying however that“it should always remain too strong for too long a period of time” with regard to the objective of inflation at 2%. For the ECB, it therefore seems urgent to wait and see how rates will continue to weigh on the economy and on prices.
The pause in monetary tightening should also make it possible to better assess the effect of geopolitical tensions linked to the war between Israel and Hamas, which raise fears of a surge in the cost of oil and energy. The President of the ECB, Christine Lagarde, had suggested in recent weeks that the trajectory of unprecedented rate increases, which began in July 2022, was coming to an end and that the Frankfurt institution was going to enter a stabilization phase.
Economic data released in recent weeks have also argued for leaving rates unchanged, with weak activity pointing to a contraction in euro zone gross domestic product in the third quarter. Inflation, for its part, surprised on the decline, falling from 5.2% in August to 4.3% in September, year-on-year, returning to its October 2021 level.