European Central Bank holds interest rates to control inflation

This article was originally published in English

The ECB announced its decision to maintain its key interest rates at its meeting on July 18.

The interest rate on the main refinancing operations – the rate that banks pay when they borrow money from the ECB for a week – was kept at 4.25%.

The deposit facility rate – which banks can use to make overnight deposits with the Eurosystem – remains at 3.75%, and the marginal lending facility rate – which allows banks to obtain overnight credits from the Eurosystem – has been kept at 4.50%.

Maintain rates to better combat inflation

In a statement Published after the decision was announced, the ECB said that its priority was to ensure that inflation returned as soon as possible to its medium-term target of 2%.

“[Le Conseil des gouverneurs] will keep policy rates at a sufficiently restrictive level, for as long as necessary, to achieve this objective”we can read in the press release.

This decision was widely expected by European market players, in the absence of any significant change in economic data since June.

The next quarterly macroeconomic projections, which will be carried out in September, will undoubtedly provide more clarity on the European economic market.

Inflation down slightly in Europe

The euro area’s annual inflation rate was 2.5% in June 2024, down from 2.6% in May.. A year earlier, it was 5.5%. In the European Union, the rate was 2.6% in June 2024, compared to 2.7% in May, according to data published Wednesday by Eurostat.

The lowest annual rates were recorded in Finland (0.5%), Italy (0.9%) and Lithuania (1.0%). They were highest in Belgium (5.4%), Romania (5.3%), Spain and Hungary (3.6% each). Compared with May 2024, annual inflation fell in seventeen Member States, remained stable in one and rose in nine..

“In June 2024, the highest contribution to the euro area annual inflation rate was made by services (+1.84 percentage points, pp), followed by food, alcohol and tobacco (+0.48 pp), non-energy industrial goods (+0.17 pp) and energy (+0.02 pp)”specifies Eurostat.