ECB keeps interest rates on hold despite eurozone inflation fears | European Central Bank

The European Central Bank kept interest rates steady at its third consecutive meeting on Thursday, despite concerns that a modest economic recovery in the euro zone would increase inflation.

The ECB kept its key deposit rate at 2% despite annual price growth in the 20-member euro bloc rising to 2.2% in September from 2% in August and 1.7% a year earlier.

According to Eurostat, annual inflation in the 27-member EU rose to 2.6% in September from 2.4% in August.

The European Central Bank said its six-member governing council’s view on inflation was “generally unchanged”. “The strong labor market, solid private sector balance sheets and the governing council’s past rate cuts remain important sources of resilience,” the statement said.

The euro zone economy grew by 0.2 percent in the third quarter compared to the previous three months, according to preliminary data published by the European Commission on Thursday.

The rise was 0.1% higher than City analysts expected 0.1%; The main reason for this increase was the strong performance of Spain, which grew by 0.6%, and the 0.5% increase in France.

The ECB’s interest rate decision followed the divergence in price growth across the euro zone, which the central bank expected to keep at around 2 percent.

While Cyprus kept inflation at zero, it rose moderately in France to 1.1% and in Italy and Greece to 1.8%. However, Romania reported an inflation rate of 8.6%, in addition to Estonia’s 5.3% and Slovakia’s 4.6%.

The ECB stated that it was concerned about the high level of inflation in services, food and energy. But over the last year and a half it has cut the main deposit rate to 2 per cent, about half the rate in the UK and US.

“The outlook remains uncertain, particularly due to ongoing global trade disputes and geopolitical tensions,” the ECB said.

Deutsche Bank’s chief European economist, Mark Wall, said: “Where is the definitive evidence for a rate cut? Despite US tariffs and all the various sources of uncertainty, the European economy continues to deliver some growth. Economic ‘resilience’ keeps the ECB’s doves in check and the policy pause remains on track.”

The Bank of England’s policymakers are expected to keep the headline interest rate at 4% when they meet on 6 November. On Wednesday, the US Federal Reserve cut its benchmark interest rate by a quarter point to a range of 3.75% to 4%; This was the second sale this year.