BRUSSELS: The European Central Bank kept its deposit rate at 2.5% yesterday, hours after President Christine Lagarde said she would leave next February, months before her term ends, as France's bond market turmoil and inflation at 3.8% cloud the outlook for the eurozone.
The European Central Bank (ECB) left its key deposit rate unchanged at 2.5% yesterday, at a meeting overshadowed by President Christine Lagarde's announcement earlier in the day that she will leave her post next February, months before her term ends.
The pause comes as a sell-off in French government bonds pushes up borrowing costs across the eurozone, while inflation runs at 3.8%, almost double the ECB's 2% target.
The decision by the Governing Council, which sets interest rates for the 21 countries that use the euro, follows two rate hikes this year, the latest in September, as energy prices linked to the Iran war drove inflation higher. The rates on its main refinancing operations and marginal lending facility also stay at 2.65% and 2.90% respectively.
In its statement, the ECB said energy prices had "continued to rise, posing upside risks to the inflation outlook and downside risks to the growth outlook".
Underlying inflation has "remained broadly stable so far and wages do not show a material response at this stage", it said, but warned that the size and duration of the energy shock were "likely to drive up inflation and lower growth".
The central bank also acknowledged that financing conditions "have tightened since the Governing Council's last meeting, which is likely to weigh on inflation and growth", and repeated that it was "not pre-committing to a particular rate path".
Inflation in the eurozone rose to 3.8% in September, up from 3.2% in August, and the pause had been widely expected. — EuroNews