Higher for Longer: European Central Bank (ECB) Holds Rates Steady

The Governing Council of the European Central Bank (ECB) has decided to hold rates steady today. The Council indicated that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.50%, 4.75%, and 4.00%, respectively.

Echoing the mantra across the Atlantic, the ECB said that it believed current rates would accomplish its objectives if “maintained for a sufficiently long duration.”

Similar to the US Federal Reserve, the  ECB has a mandate of achieving a rate of inflation of 2%.

Concurrently, the ECB said it would continue to wind down its asset purchase program (APP) and pandemic purchase program (PEPP), thus pumping the brakes on quantitative easing.

The Governing Council said it will continue to follow a data-dependent approach to determining the appropriate level and duration of the higher rates. Future rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission.

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