On Thursday, the European Central Bank ended the longest run of rate increases in its 25-year history, stating that the most recent statistics continued to indicate that inflation would gradually decline to its objective of 2%.
The eurozone’s central bank maintains record-high deposit rates at 4.0%, reiterating that current borrowing costs might contain inflation if maintained for a “sufficiently long” period.
“The Governing Council’s past interest rate increases continue to be transmitted forcefully into financing conditions,” the European Central Bank stated. “This is increasingly dampening demand and thereby helping push down inflation.”
The European Central Bank (ECB) has been increasing borrowing costs and removing stimulus policies implemented throughout ten years of low inflation, including large bond purchases and inexpensive bank credit, for more than a year after an unexpected price spike.
Data from earlier this week showed sluggish credit creation and economic activity, indicating that this drastic policy tightening impacts the economy.
The European Central Bank (ECB) reaffirmed on Thursday that it will continue to add to the pile of bonds purchased under its Pandemic Emergency Purchase Programme (PEPP), totaling 1.7 trillion euros ($1.79 trillion) until the end of 2020.
Despite calls from some officials for the ECB’s final remaining bond-buying program to cease sooner rather than later, the bank views PEPP as its first line of defense against market volatility.
Investor attention will now turn to Christine Lagarde, President of the European Central Bank, at 12:45 GMT.
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