The European Central Bank left borrowing costs unchanged in October; President Christine Lagarde said new data will inform its December decision on a possible increase as the energy shock risks faster inflation and weaker growth, Reuters reported.
Speaking at the New Dialogues for the Future event in Milan on Thursday, Nov. 5, Lagarde said indicators arriving before the next meeting would help officials assess whether to raise rates. Reuters quoted her saying the information would help determine “whether a hike is necessary.” The ECB calendar lists her appearance and says no text would be published.
At its Oct. 29 meeting, the ECB Governing Council kept the deposit facility rate at 2.50%, the main refinancing operations rate at 2.65% and the marginal lending facility rate at 2.90%. The Council said the energy shock’s magnitude and duration, together with its indirect and second-round effects, could lift inflation and weigh on growth.
The ECB said underlying inflation was broadly stable and wages had not materially responded to the energy shock at the time of its October decision. The central bank aims to stabilize inflation at 2% over the medium term. It says rate decisions depend on incoming economic and financial data, underlying inflation dynamics and the strength of monetary policy’s effects, without committing to a particular rate path.
Reuters also reported that Lagarde cited investment linked to artificial intelligence as supporting demand and the euro-area economy’s resilience. Separately, Il Sole 24 Ore’s Radiocor service reported that the energy shock could last longer than initially expected and affect prices through indirect channels. The service cited vehicle diesel and aircraft fuel as ways energy costs can reach the broader economy.
The ECB’s next monetary-policy meeting is scheduled for Dec. 16-17, with a press conference on the second day.
