💡The Governing Council of the European Central Bank (ECB) has decided to maintain the status quo in terms of interest rates, keeping them at the current level. This decision aligns with market and analyst expectations.

The current ECB interest rates are as follows:

  • Refinancing operations rate: 4.50%.
  • Central bank lending rate: 4.75%.
  • Deposit rate: 4.00%.

📢 These levels have been maintained since September 2023, marking the longest period of interest rate stability in over two decades.

Quantitative Tightening (QT) Policy Still in Play

The ECB also continues its Quantitative Tightening (QT) policy. As part of this policy, the Governing Council has decided to reduce the portfolio of the PEPP program, planning to end reinvestment by the end of 2024.

Change in Inflation Forecasts

A significant element of the latest ECB communication is the reduction of inflation forecasts for the eurozone. In February, the HICP inflation dropped to 2.6%, nearing the ECB’s inflation target of 2%. Nonetheless, the services sector continues to experience strong price pressure, with core inflation exceeding 3%.

In the latest forecasts, ECB experts predict that inflation in the eurozone will average 2.3% in 2024, then stabilize at 2.0% in 2025 and 1.9% in 2026. This includes forecasts for inflation excluding energy and food prices.

Awaiting Changes: When Might Interest Rates Begin to Fall?

The market is speculating about the possible timing of the ECB’s interest rate reductions. Most economists believe that the first cut could occur in June 2024, depending on data regarding wage pressure in the first quarter and inflationary trends.