With inflation down, people are talking rate cuts
The European Central Bank has decided to keep its key interest rate at a record high
FRANKFURT, Germany — The European Central Bank kept its key interest rate at a record high Thursday and said it will keep them there as long as needed to battle back inflation, signaling little as expectations grow that it will start cutting borrowing costs next year to support the shrinking economy.
It follows similar decisions this week by the U.S. Federal Reserve, Bank of England and Swiss National Bank to leave rates unchanged. The Fed also signaled it could make three interest rate cuts next year.
The ECB gave away little about its future moves in a statement after keeping its benchmark rate at 4% but noted that inflation was “likely to pick up again temporarily in the near term.”
In a signal that cuts may not be around the corner, bank President Christine Lagarde said future decisions will ensure that rates “will be set at sufficiently restrictive levels for as long as necessary.” She spoke hoarsely at a news conferences, saying she was recovering from COVID-19 but was no longer contagious.
Central banks worldwide drastically raised rates to contain inflation that broke out in the wake of the COVID-19 pandemic and Russia’s invasion of Ukraine. They’re now trying to balance keeping rates high for long enough to ensure inflation is contained against the risk that higher borrowing costs could throw their economies into recession.
Inflation has fallen more than expected in the 20 European Union countries that use the euro currency, to 2.4% in November from a peak of 10.6% in October 2022. That’s not too far from the ECB’s goal of 2% considered best for the economy.
That has led analysts to predict the ECB will cut rates next year,
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