The European Central Bank has kept its key interest rate unchanged at a record high
FRANKFURT, Germany — European Central Bank President Christine Lagarde pushed back Thursday against market expectations for quick interest rate cuts even as Europe’s economy sputters and financial markets froth in hopes of cheaper credit that would boost business activity and stock prices.
The bank left its benchmark rate unchanged at a record-high 4%, and Lagarde said afterward that “the consensus around the table… was that it was premature to discuss rate cuts.”
Financial markets have been expecting a cut as early as April, but Lagarde said bank officials would make decisions based on the latest figures about the economy’s health, rather than offering a longer-term timetable for rate moves. She did say she stood behind a comment she made last week about a “likely” cut this summer.
Inflation has declined markedly to 2.9% in December from a painful peak of 10.6% in October 2022 that made everything from groceries to energy more expensive. Lagarde acknowledged the drop — which is getting closer to the bank’s goal of 2% — and said inflation was expected to keep easing this year.
She cautioned, however, that disruption stemming from the Israel-Hamas war, including attacks on ships in the Red Sea by Yemen's Houthi rebels, could disrupt that progress.
Risks for higher inflation “include the heightened geopolitical tensions, especially in the Middle East, which could push energy prices and freight costs higher in the near term and hamper global trade,” she said.
Though Europe's economy has been shrinking and is particularly at risk from trade turmoil in the Red Sea, some analysts agreed that the time isn't now to start making it easier for
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