The E.C.B. held to its policy of easing off support for the economy and tolerating record-high inflation in “the interim,” leaving its interest rate untouched.
The European Central Bank on Thursday kept to its cautious approach in the face of record inflation in the eurozone, but will continue to pull back from its pandemic-era support for the economy. A change in policy was not expected when the European Central Bank’s Governing Council met this week for the first time this year, but pressure has been mounting from all sides as prices in Europe continue to rise. Traders have been at odds with the central bank’s message that the eurozone economy is not ready for higher interest rates. On Wednesday, before the policy announcement, markets had priced in two 10-basis-point increases in the deposit rate this year. The rate is currently negative 0.5 percent. Inflation data released on Wednesday surprised economists, showing that the rate of price rises in January in the 19 countries using the common European currency had reached 5.1 percent compared with a year ago. That was only a slight increase from the 5 percent rate in December, but set yet another record for the eurozone. Analysts had projected that the January rate would fall to 4.4 percent — still well above the bank’s set target of 2 percent. The bank’s Governing Council said on Thursday that it expected the key interest rates will “remain at their present or lower levels” until policymakers see inflation “reaching 2 percent well ahead of the end of its projection horizon and durably for the rest of the projection horizon,” adding that it would tolerate higher inflation in the interim.
