The European Central Bank (ECB) has decided, as expected, to keep interest rates unchanged at 2.5%, following two increases this year, although it warns of "upside risks to the outlook for inflation and downside risks to that of growth."
In the statement following the meeting, the institution acknowledges that "the total effects of the energy crisis are still manifesting" and sees "it likely that the greater magnitude and duration of the energy crisis, as well as its implications for indirect and second-round effects, will raise inflation and reduce growth."
"Financing conditions have tightened since the last Governing Council meeting, which will likely negatively affect inflation and growth," the ECB reiterates.
However, the body chaired by Christine Lagarde highlights that the Governing Council remains "in a good position to face the current uncertainty".
Once again, the ECB states that it is committed to establishing a monetary policy that ensures inflation stabilises at its 2% target in the medium term. It reiterates what has been said in previous meetings, that it will adopt an approach that will depend on the data and will adapt at each meeting to determine the appropriate monetary policy stance.
"The Governing Council's decisions on interest rates will be based on its assessment of inflation prospects and associated risks, in light of the economic and financial data published, as well as the dynamics of underlying inflation and the effectiveness of monetary policy transmission. The Governing Council does not commit in advance to a specific interest rate path," the text states.
The ECB meeting takes place on the same day that it has been announced that Lagarde will leave the presidency on 7 February next year, before her term ends in October 2027. She has held the position since taking over from Mario Draghi in 2019.
