Finance

European Central Bank, Citing Wage Growth, Keeps Rates Steady

The European Central Bank on Thursday held interest rates steady for a fourth consecutive meeting, even as policymakers noted the progress that has been made in their battle against high inflation.

The deposit rate remained at 4 percent, the highest in the central bank’s two-and-a-half decade history. Officials are weighing how soon they can bring interest rates down.

“Interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution,” to returning inflation to the bank’s 2 percent target in a timely manner, the central bank said in a statement. “The Governing Council’s future decisions will ensure that policy rates will be set at sufficiently restrictive levels for as long as necessary.”

Last month, the annual rate of inflation in the eurozone slowed to 2.6 percent, edging closer to the central bank’s target. But policymakers at the bank, which sets interest rates for the 20 countries that use the euro, have been cautious about cutting rates too quickly and reinvigorating inflationary pressures. Economists have warned that the path to achieving the bank’s inflation target is likely to be bumpy.

These concerns played out in the latest inflation report, where the headline rate for February came in higher than economists had expected and core inflation, a critical gauge of domestic price pressure that strips out energy and food prices, was also higher than forecast.

Traders had been betting that interest rates would be cut in June, but started to dampen their expectations after the inflation data was released.Those rate-cut expectations are likely to be bolstered again, as the central bank lowered its inflation forecasts on Thursday. It now sees inflation averaging 2 percent, meeting its target, next year and then falling to 1.9 percent in 2026.

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