The European Central Bank (ECB) on Thursday held interest rates at 4%, signalling no policy action for the fourth-consecutive month and following in the Federal Reserve’s cautious footsteps.
Like the Fed, there was no major shift towards dovishness in the following press conference, where ECB president Christine Lagarde said that current levels of policy were being maintained “for a sufficiently long duration” to bring inflation back down to its 2% target.
The central bank did lower its inflation forecasts. The ECB now expects inflation to average 2.3% this year, down from December’s forecast of 2.7%, and sees the rate averaging 2% in 2025, down from 2.1%.
Market Reaction
Markets responded positively, with the higher-for-longer rates scenario boosting the euro against the dollar and expectations of rate cuts later in the year pushing stock prices higher.
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