Europe Freezes Rates for Sixth Consecutive Time, Expresses Confidence in Tackling Inflation

On the 19th (local time), the European Central Bank (ECB) kept all three of its key policy rates, including the deposit rate, unchanged. This marks the sixth consecutive freeze since July of last year. Christine Lagarde, President of the ECB, expressed confidence that the central bank can respond effectively to inflation driven by war.

On the 19th (local time), after concluding the monetary policy council meeting held at the European Central Bank (ECB) headquarters located in Frankfurt, Germany, Christine Lagarde, President of the ECB, held a press conference. Photo by Reuters Yonhap News

On this day, the ECB held a monetary policy meeting in Frankfurt, Germany, and announced that it would maintain the deposit rate (annual 2.00%), the main refinancing rate (2.15%), and the marginal lending rate (2.40%) all at their current levels.

Additionally, in its quarterly economic outlook, the ECB raised its forecast for the eurozone (21 countries using the euro currency) consumer price inflation this year from 1.9% to 2.6%. The economic growth outlook was revised down from 1.0% to 0.9%. For next year, the inflation forecast was adjusted upward from 1.8% to 2.0%, while the growth forecast was lowered from 1.4% to 1.3%.

The ECB stated, "The war will have a material impact on short-term inflation by increasing energy prices," adding, "The medium-term effects will depend on the intensity and duration of the conflict, as well as the impact of energy prices on consumer inflation and the economy."

Separate from its quarterly economic outlook, the ECB also provided estimates based on fluctuations in energy prices. Assuming that international oil prices peak at $145 per barrel (about 216,000 won) and natural gas at 106 euros per MWh (about 182,700 won) in the second quarter of this year before gradually declining, consumer price inflation is estimated at 4.4% for this year and 4.8% for next year.

At the press conference, President Lagarde emphasized, "Europe is well prepared to cope with the growing risks from the Iran war," adding, "We will take firm action to stabilize inflation at our 2% target." She continued, "If energy prices continue to rise, it could lead to broader inflation, so we need to monitor the situation closely."

She reported that the decision to keep rates unchanged was unanimous. President Lagarde explained, "In 2022, when the Ukraine war triggered an energy crisis, the inflation rate was already at 6% and demand was suppressed due to the COVID-19 pandemic," adding, "The situation now is different." At that time, the ECB faced criticism for "raising rates too late."

With this rate freeze, the gap between the eurozone's deposit rate and Korea's base rate (2.50%) remains at 0.50 percentage points. The interest rate gap between the eurozone and the United States (3.50–3.75%) stands at 1.50–1.75 percentage points.

Meanwhile, on the same day, the Bank of England (BOE) also unanimously decided to keep its base rate unchanged at 3.75% per annum.

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