Both ECB and BOE Hold Interest Rates Steady... Lagarde Says "No Discussion on Rate Cuts"

Following the US Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BOE) also kept interest rates unchanged. However, unlike the Fed, which signaled rate cuts next year, the ECB and BOE did not send any signals of rate reductions. Christine Lagarde, President of the ECB, dismissed the idea, saying, "We did not discuss rate cuts at all."

[Image source=Reuters Yonhap News]

On the 14th (local time), the ECB announced at its monetary policy meeting that the key interest rate was held steady at 4.5% per annum, while the deposit rate and marginal lending rate were maintained at 4.0% and 4.75% per annum, respectively. The ECB, which had engaged in a high-intensity tightening by raising rates 10 consecutive times since July last year, kept rates unchanged again following the first pause in October.

The ECB stated, "Tight financing conditions are dampening demand, which is helping to bring down inflation," but also noted, "Although inflation has slowed over recent months, it may temporarily rise again in the near term." It added, "We will determine the appropriate restrictive level and duration based on the data." At the subsequent press conference, President Lagarde also emphasized, "We must never let our guard down in the fight against inflation."

Alongside this, the ECB revised its inflation forecasts downward to 5.4% from 5.6% for this year and to 2.7% from 3.2% for next year. The economic growth forecast was also lowered from 0.7% to 0.6% for this year and from 1.0% to 0.8% for next year. Additionally, regarding the Pandemic Emergency Purchase Programme (PEPP), the ECB decided to accelerate balance sheet reduction by stopping principal reinvestments of maturing bonds by the end of next year.

As the cumulative effects of tightening confirm a trend of slowing inflation, the key question in financial markets is when central banks will begin cutting rates. Deutsche Bank predicted in its latest report that the ECB will make its first rate cut in April next year. In response, President Lagarde said, "We need to monitor key data," and drew a clear line, stating, "It is still too early to discuss rate cuts."

On the same day, the UK also kept rates unchanged for the third consecutive time. The Bank of England (BOE) announced at its Monetary Policy Committee meeting that the key interest rate was held at 5.25% per annum. Among the nine committee members, six voted to keep rates steady, while three favored a 0.25 percentage point increase.

It was reported that there was no discussion of rate cuts during this meeting. The UK's consumer price inflation rate recorded 4.6% last month, far exceeding twice the BOE's policy target. Andrew Bailey, Governor of the BOE, said, "The series of rate hikes has helped reduce inflation from over 10% in January this year, but there is still a long way to go. We will make the necessary decisions to bring it back to the target."

This content was produced with the assistance of AI translation services.