The European Central Bank (ECB) decided to keep its three main policy interest rates unchanged on April 30 local time. The deposit facility rate remains at 2.00%, the main refinancing rate at 2.15%, and the marginal lending facility rate at 2.40%.
Stable Rates Since Mid-2024
These rates have stayed constant since June 2024, when the ECB lowered the deposit rate to 2.00 percentage points. All subsequent Governing Council meetings, including this one last July, resulted in no adjustments.
Addressing Inflation and Growth Uncertainties
ECB officials stated that monetary policy occupies a favorable position to navigate current uncertainties. They noted that risks of rising prices and an economic slowdown have diminished.
Eurozone consumer prices surged 3.0% in April, exceeding the median forecast of 2.6% by 0.4 percentage points. Core inflation, excluding volatile food and energy, reached 2.6%. Meanwhile, economic growth accelerated by just 0.1% quarter-on-quarter, down from the prior period’s pace.
Broader Economic Influences
Officials highlighted that inflation dynamics hinge on energy price trends, wage developments, profit margins, and secondary effects. They emphasized maintaining a restrictive stance given elevated energy costs and wage pressures, while justifying reasons for sustained tightness.
Interest Rate Differentials
This rate freeze widens the gap between the ECB’s deposit rate and the U.S. federal funds rate (2.50%) to 0.50 percentage points. The overall spread with U.S. rates stands at 1.50-1.75 percentage points.
Markets anticipate the ECB may raise policy rates as early as the June meeting, with two potential hikes possible before year-end.
