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ECB keeps rates on hold

February 3, 2022

While other central banks are scrambling to raise rates in the face of inflation, the European Central Bank has maintained its low rates.

The European Central Bank (ECB) headquarters in Frankfurt
Banks must pay the ECB to park excess funds overnightImage: Wolfgang Rattay/REUTERS

The European Central Bank kept interest rates on hold at 0.0% on Thursday, despite record inflation.

While the Bank of England announced it would raise rates by a quarter point to 0.5%, and the US Federal Reserve signaled multiple rate rises, the ECB kept its record low rates. The bank will also prolong a negative deposit rate that charges banks to park their money overnight at the bank to the tune of minus 0.5%.

Inflation in the eurozone hit an all-time high of 5.1% in January, according to new official data — well above the ECB's target rate of 2%.

The decision to maintain its low interest rates was expected, but it will likely face growing pressure to tighten policy over the course of the year. 

ECB chief Christine Lagarde was due to release a statement later on Thursday, that could provide insight into the bank's plans. So far, she has said rate rises this year are "very unlikely."

Inflation has largely been driven by supply issues, where the ECB has less ability to act. Meanwhile, energy prices have soared and could rise further in the face of the Ukraine crisis.

aw/sms (AFP, Reuters)