ECB keeps rates on hold

FRANKFURT -- The European Central Bank (ECB) announced on Thursday that it will keep key interest rates unchanged at its latest rate-setting meeting.

The deposit facility rate, through which the central bank steers the monetary policy stance, remains unchanged at two percent.

Inflation in the euro area inched up to two percent in June from 1.9 percent in May, according to data released by the statistical office of the European Union (EU). The ECB said in a statement that domestic price pressures continue to ease and wages grow at a slower pace.

While short-term consumer inflation expectations declined for two consecutive months in a row, most measures of longer-term inflation expectations continue to stand at around two percent, explained the central bank.

As inflation in the euro area hovers around the targeted level of two percent, the ECB reaffirmed that it is determined to make sure the inflation stabilises in the medium term.

"The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises at its two percent target in the medium term and to preserve the smooth functioning of monetary policy transmission," it said.

Data indicate that the euro area economy has turned out to be resilient. The gross domestic product (GDP) in the first quarter this year rose by 0.6 percent, stronger than expected.

The ECB cut the interest rate of the deposit facility by two percentage points from June 2024 to June this year.

While the ECB insists in its press release that the governing council is not pre-committing to a particular rate path, Isabel Schnabel, member of the Executive Board of the ECB, was quoted as saying that the interest rates are in a good place and the bar for another rate cut is very high.

According to Schnabel, the euro area economy is navigating uncertainties better than expected and "a large fiscal impulse" will further support the economy.