ECB Keeps Key Interest Rates Unchanged

Written by Henrik Rothen

Dec.14 - 2023 2:22 PM CET

ECB Keeps Key Interest Rates Unchanged.

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Just like in October, the European Central Bank (ECB) has decided not to increase its key interest rates. The ECB made this decision on Thursday, continuing the status quo established in October when, after ten successive increases, it chose not to adjust its key rates.

According to BFMTV, the deposit rate, which is the benchmark, was raised by 25 basis points last September to reach 4%, a level not seen since the introduction of the euro in 1999. The refinancing rate and the marginal lending facility rate are currently at 4.50% and 4.75%, respectively.

As the drastic cycle of rate hikes seems to be nearing its end for major monetary institutions, the question now arises as to when the tightening will be eased. The Swiss National Bank has kept its main rate at 1.75%, while inflation, which fell to 1.4% in November, remains under surveillance.

The Bank of Norway, noting that inflation is still too high, has raised its rate for the fourteenth time in over two years, by 0.25 points to 4.5%. However, it plans to maintain this level "for some time."

The Bank of England (BoE), on the other hand, has left its key rate unchanged at 5.25%, noting that inflationary pressures persist and that its rates are likely to remain high "for an extended period."

Investors will be on the lookout for any hint as to when interest rates might start to decrease. On Wednesday, the U.S. Federal Reserve (Fed) paved the way by deciding to maintain its rates for the third consecutive time.

A further increase is "unlikely," and the Fed's Monetary Committee has "discussed a timetable for rate cuts," commented its chairman Jerome Powell. In Europe, markets are hoping for a first easing between March and April next year.

The ECB aims to maintain high rates as long as necessary, fearing a new surge in energy prices amid geopolitical tensions, particularly in the Middle East. It is also concerned about wage increases that could fuel a rebound in prices.