The European Central Bank (ECB) kept interest rates unchanged at a record-high 4 percent on Thursday and reaffirmed its commitment to fighting inflation, giving no hint that policymakers are even contemplating a start to easing.
The ECB ended its fastest-ever cycle of rate hikes in September but has been adamant that it is too soon to discuss a reversal, since price pressures have not been fully extinguished and many wage negotiations have yet to conclude, Reuters reported.
Investors are betting that the ECB is getting it wrong on both growth and inflation and will be forced to U-turn and deliver five rate cuts in rapid succession from early spring.
But ECB policymakers signalled no such pivot and made only slight changes to their statement, repeating longstanding guidance that holding interest rates at the current level for sufficiently long would bring inflation back to their 2 percent target.
“The consensus around the table was that it was premature to discuss rate cuts,” ECB President Christine Lagarde told her regular news conference following the decision, insisting that future decisions would depend on incoming data.
“We need to be further along the disinflation process to be confident that inflation will be at target – sustainably so,” she said.
The bank said in its written statement that inflation trends broadly confirmed its previous assessment, but cut a reference in previous statements to elevated domestic price pressures and strong labour cost growth.
Lagarde cautioned against over-interpreting such omissions and urged observers to focus more on what content was left in the statement.
Market pricing, however, suggested that expectations for an April rate cut had firmed slightly.
Follow us on
