ECB holds interest rates at 2%

The European Central Bank (ECB) held interest rates for the third consecutive month on Thursday, a widely-expected move by the bloc which has been managing an easing cycle over the past year.

The main policy rate remained at 2%, while its deposit rate was held at 2.15%.

In its justification for the hold, the ECB said: "The new ECB staff projections present a picture of inflation similar to that projected in June.

"The Governing Council is determined to ensure that inflation stabilises at its 2% target in the medium term. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance."

Further information will follow in a press conference later on Thursday afternoon.

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The ECB has already halved its policy rate from a record high of 4% in the space of a year after taming a surge in prices that followed the end of the COVID-19 pandemic and Russia’s invasion of Ukraine.

It cut interest rates by a quarter of a percentage point for the eighth time in a year in June, as rate setters attempt to support the euro economy after the turmoil caused by US president Donald Trump’s trade war.

The bank then held rates at 2% in July, with ECB president Christine Lagarde saying that the bank is in a "good place".

Bets had been cast on another interest rate hold amid data showing inflation edging above the central bank's 2% target. Earlier in September, preliminary figures showed euro area inflation hitting 2.1% in August.

Looking at the main components of inflation, food, alcohol & tobacco are expected to have had the highest annual rate in August at 3.2%, compared with 3.3% in July. This is followed by services at 3.1% compared with 3.2% in July and non-energy industrial goods at 0.8% which is stable compared with July.

Energy prices brought the overall rate lower, decreasing 1.9%, compared with a 2.4% dip in July.

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