ECB Keeps Rates Steady, Lagarde Optimistic on Disinflation

ECB Keeps Rates Steady, Lagarde Optimistic on Disinflation 

The European Central Bank (ECB) stated that it believes current interest rates are playing a significant role in the ongoing process of reducing inflation. 

Financing conditions are still tight, and previous increases in interest rates are continuing to dampen demand, thus pushing inflation downwards. 

The ECB decided to maintain three interest rates unchanged: the deposit facility rate at 4.00%, the marginal lending facility rate at 4.75%, and the benchmark refinancing rate at 4.50%. 

Additionally, the ECB disclosed that 4 million euros were borrowed through the overnight loan facility, while 3260.29 billion euros were deposited.

ECB President Lagarde emphasized attentiveness to changes in oil prices, stated the intention not to wait for each inflation component to reach 2%, and noted the non-linear nature of the inflation decline. She highlighted the differences between US and Eurozone inflation drivers and affirmed the relevance of previous statements made at the Watchers Conference. 

Lagarde refrained from speculating on other central banks' actions, asserted that the ECB is not dependent on the Federal Reserve, and mentioned a few dissenters who aligned with the consensus. 

She anticipated gathering more data by June, warned of growth risks tilted to the downside, and forecasted a decline in inflation to target levels next year, with fluctuations around current levels in the coming months. 

Lagarde observed a gradual decrease in price pressures and labor market tightness, expected exports to improve in the upcoming quarters, and foreseen support for recovery from rising real incomes, although the overall economic condition remains weak. 

She found reassurance in monetary policy's contribution to disinflation, noting a decline in inflation and progress in disinflation.