April 11, 2024
The Governing Council today decided to keep the ECB’s three key interest rates unchanged. The information received largely confirmed the Governing Council’s previous assessment of the medium-term inflation outlook. Inflation continued to fall, driven by falling prices for food and goods. Most measures of core inflation are easing, wage growth is gradually moderating, and businesses are absorbing some of rising labor costs into profits. Financing conditions remain restrictive and past increases in interest rates continue to weigh on demand, helping to bring down inflation. But pressures on domestic prices are strong and are keeping service price inflation high.
The Governing Council is determined to ensure that inflation returns to its medium-term objective of 2% in a timely manner. It considers that the ECB’s key rates are at levels which contribute substantially to the ongoing disinflation process. Future decisions by the Governing Council will ensure that its policy rates remain sufficiently restrictive for as long as necessary. Should the Governing Council’s updated assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission further strengthen its confidence in the sustainable convergence of inflation towards the objective, it would be appropriate to reduce the current level of monetary policy restraint. Regardless, the Governing Council will continue to follow a data-driven, meeting-by-meeting approach to determining the appropriate level and duration of restrictions, and it is not precommitting to a particular tariff trajectory.
ECB key interest rates
The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.50%, 4.75% and 4.00% respectively.
Asset Purchase Program (APP) and Pandemic Emergency Purchase Program (PEPP)
The APP portfolio is shrinking at a measured and predictable pace, with the Eurosystem no longer reinvesting the principal of maturing securities.
The Governing Council intends to continue to fully reinvest the principal of maturing securities purchased under the PEPP during the first half of 2024. During the second half of the year, it intends to reduce the PEPP portfolio by 7.5 billion euros per month. on average. The Governing Council intends to halt reinvestments under the PEPP at the end of 2024.
The Governing Council will continue to demonstrate flexibility in reinvesting maturing redemptions in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism linked to the pandemic.
Refinancing operations
As banks repay amounts borrowed under the targeted long-term refinancing operations, the Governing Council will regularly assess the extent to which the targeted lending operations and their ongoing repayment contribute to its monetary policy stance.
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The Governing Council is ready to adjust all its instruments within its mandate to ensure that inflation returns to its 2% target in the medium term and to preserve the smooth functioning of monetary policy transmission. Furthermore, the transmission protection instrument is available to counter unjustified and disorderly market dynamics that pose a serious threat to the transmission of monetary policy in all euro area countries, thus allowing the Governing Council to fulfill its price stability mandate more effectively.
The ECB President will comment on the considerations behind these decisions at a press conference starting today at 2:45 p.m. CET.
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