25 January: Bank Of England To Follow Suit Next Week?
The European Central Bank (ECB) has today held borrowing costs across the Eurozone for the third consecutive time, leaving its main refinancing rate at 4.5%, an all-time high, writes Andrew Michael.
Its marginal lending facility stays at 4.75%, with the deposit rate at 4%.
The ECB said prevailing data “broadly confirmed” its previous assessment of the medium-term economic outlook: “Aside from an energy-related upward base effect on headline inflation, the declining trend in underlying inflation has continued, and the past interest rate increases keep being transmitted forcefully into financing conditions.
“Tight financing conditions are dampening demand, and this is helping to push down inflation.”
Along with other central banks such as the Bank of England and the US Federal Reserve, the ECB is required to maintain inflation at 2% over the medium- to long-term.
The Bank of England will reveal its latest Bank Rate decision on 1 February. The Federal Reserve will announce its decision on 31 January.
The ECB last raised interest rates in September 2023, the tenth consecutive hike, in response to soaring inflation levels that peaked at 10.6% across the trading bloc in October 2022.
In the year to December 2023, Eurozone inflation stood at 3.4%, considerably above target. This compared with a reading of 4% in the UK and 3.4% in the US.
In line with today’s announcement,…
