The European Central Bank has decided to leave all three key interest rates unchanged. Thus, the base loan rate remains at 4.5%, the deposit rate at 4%, and the margin loan rate at 4.75%. Representatives of the bank noted that despite the decline in most indicators of core inflation, price pressures in domestic markets are still high, in particular due to rising wages. Restrictive financial conditions and previous rate hikes continue to have an impact on demand, which in turn contributes to a slowdown in consumer price growth. The ECB confirmed its intention to return inflation to the medium-term target of 2%. According to current estimates, the bank believes that key interest rates are at a level that, if maintained for a sufficiently long period of time, will play a significant role in achieving this goal. The regulator clarified that future decisions will leave key rates at fairly restrictive levels for as long as necessary. The ECB will continue to follow an approach in which decisions on the level of rates and the duration of maintaining restrictive policy will be determined by statistical data, including data on the dynamics of inflation and the transmission of monetary policy. In addition, the bank reported a reduction in the portfolio of securities acquired under the asset repurchase program (APP) at a moderate and predictable pace. The regulator also plans to continue reinvesting proceeds from the repayment of securities purchased under the emergency asset repurchase program (PEPP) in the first half of 2024. However, starting in the second half of the year, the ECB plans to reduce the portfolio of securities repurchased under PEPP by an average of 7.5 billion euros per month. The regulator intends to stop reinvesting proceeds under PEPP by the end of 2024.
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