The European Central Bank (ECB) has left its trendsetting interest rate unchanged at a record high of 4% and warned that future decisions will be driven by economic data.
Inflation across Europe declined to 2.9% in December 2023 from a peak of 10.6% in October 2022. Still, ECB President Christine Lagarde said it’s too early to discuss interest rate cuts.
Speaking to media, Lagarde said “the consensus around the table was that it was premature to discuss rate cuts.”
Financial markets continue to expect that the ECB will begin cutting interest rates in April of this year, but Lagarde said future decisions will be based on the health of Europe’s economy.
The economy of the 20-member European Union trading bloc declined slightly in the third quarter of last year. Expectations are for another economic decline in Q4 2023.
Lagarde said risks to the current inflation outlook include the Israel-Hamas war, energy prices, and freight costs.
