ECB holds interest rates amid volatile economic environment

President of European Central Bank Christine Lagarde. Pic: AP Photo/Michael Probst

The European Central Bank (ECB) opted not to increase interest rates at the latest meeting of the Governing Council in Athens, but borrowing costs are set to stay high "for a sufficiently long duration".

Policymakers have given respite for mortgage customers, especially those with tracker mortgages, after European policymakers increased interest rates 10 times to 4.5% since July 2022 and the latest meeting signalled that this cycle is coming to an end.

"Inflation is still expected to stay too high for too long, and domestic price pressures remain strong," the ECB said in a statement.

"At the same time, inflation dropped markedly in September, including due to strong base effects, and most measures of underlying inflation have continued to ease," it continued.

The ECB has a mandate to target inflation at 2% or slightly lower. In September, inflation was running at 4.3%, which is the lowest since October 2021.

The ECB seemingly remained cautious about putting any further pressure on the eurozone economy as the war in the Middle-East has driven energy prices higher and global activity slows.

S&P Global’s purchasing managers’ index slowed to a three-year low in October.