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ECB chief Christine Lagarde: pause on interest rate hikes


Boris Roessler / dpa

The European Central Bank (ECB) is taking a pause in interest rates in the fight against inflation after ten hikes in a row. The monetary watchdogs around central bank chief Christine Lagarde decided not to touch the key interest rates. The key interest rate will remain at 4.5 percent after a decision by the ECB Governing Council, as the central bank in Frankfurt announced after an external meeting in Athens on Thursday.

The deposit rate, which banks receive for parking excess funds, which is trend-setting on the financial markets, remains at 4.00 percent. This is the highest level since the start of monetary union in 1999.

"The future decisions of the ECB Governing Council will ensure that key interest rates are kept at a sufficiently restrictive level for as long as necessary," the central bankers said.

In determining the appropriate level and duration of the restrictive level, the Governing Council will continue to pursue a "data-driven approach". As a result, the euro central bank is now expected to have reached the peak of interest rates on its tightening course initiated in the summer of 2022 for the time being.

Inflation in the eurozone had recently fallen significantly. In September, it fell to 4.3 percent from 5.2 percent in August. As recently as autumn 2022, the rate had been above ten percent at times. However, inflation is still more than twice as high as the euro central bank's target of two percent.

The gloomy economy in the euro area is also likely to have played an important role in the ECB's decision. According to a survey, the economy had recently accelerated its downturn.

The purchasing managers' index for the private sector – industry and the service sector together – fell by 0.7 points to 46.5 points in October. This is the lowest level in about three years. In addition, according to the Bundesbank, the German economy is likely to have contracted in the summer quarter. If economic output declines again in the current fourth quarter, it will be referred to as a "technical recession".

In addition, the escalated Middle East conflict has become a new factor of uncertainty for the monetary authorities, which could have an impact on energy prices, among other things.