The ECB did not change its three main interest rates in October

At a meeting on Thursday, October 26, the European Central Bank (ECB), as expected, left the three main interest rates at September levels. The base rate is still 4.5%, the deposit rate is 4%, and the margin loan rate is 4.75%. Let us recall that the cycle of tightening monetary policy began in July 2022: the regulator raised rates at ten consecutive meetings.

As ECB head Christine Lagarde once again repeated yesterday, commenting on the decision of the governing council, the regulator is guided by the latest statistical data. Let us note that back in the summer they put multidirectional pressure on the ECB: inflation did not decrease as quickly as the regulator expected, while business activity continued to fall. That is why some intrigue remained around the previous, September meeting until the last (see “Kommersant” on September 15). This time, the market did not doubt the ECB’s decision – the latest statistical data and leading indicators only strengthened its confidence.

According to Eurostat estimates, inflation in the euro area in September slowed to the lowest since October 2021, 4.3% (in August – 5.2%), core inflation (excluding food and energy prices) – to 4.5% (in August – 5.3%). The ECB, as follows from Ms. Lagarde’s statement, is generally satisfied with this dynamics, although it fears that the rise in energy prices, which is expected due to the development of the conflict in the Middle East (the region accounts for a third of world oil trade), could accelerate prices. There is no talk of lowering rates yet: the monetary policy, the Central Bank said in a statement, will remain tough “as long as necessary”: the benchmark is achieving the inflation target of 2%.

In a new statement, the ECB acknowledges that the long-term effects of its policies have delayed the recovery of the euro area economy. The regulator expects that as inflation slows, business activity will grow. At the beginning of the fourth quarter, we recall, it continued to decline: the composite PMI in October fell to 46.5 points (a three-year minimum) from 47.2 points in September (the 50 point mark separates the growth of activity from its contraction). Analysts surveyed by Reuters and Trading Economics predict that the peak values ​​of rates have already been reached – Christine Lagarde has not yet spoken directly about this.

Kristina Borovikova