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MEXICO CITY (AP) — The European Central Bank (ECB) left its benchmark interest rate unchanged Thursday, with its rate-setting committee and President Christine Lagarde taking time to ensure persistent inflation is firmly under control before cutting rates again.
The decision kept the deposit rate at 3.75%, where it had been after being cut by a quarter percentage point at the last meeting on June 6.
“Local price pressures remain elevated, services inflation is also elevated, and headline inflation is likely to remain above target for a long time next year,” the bank said in a statement accompanying the decision.
That means homebuyers and businesses hoping for lower interest rates in Europe will have to wait until at least the central bank’s September meeting for more affordable credit, and possibly longer.
For now, the ECB’s stance is reminiscent of that of the Federal Reserve, which is expected to refrain from cutting rates at its next meeting on July 30-31, although the Fed appears to be closer to a rate cut than the ECB after that meeting.
The European Central Bank, the Federal Reserve, the Bank of England and other developed-world central banks have raised interest rates sharply to quell a surge in inflation following Russia’s invasion of Ukraine and the end of the pandemic.
Higher interest rates make borrowing, spending and investing more expensive, cooling demand for goods and historically holding back rising consumer prices.
Eurozone inflation has fallen from a high of 11.6% in October 2022 to 2.5% in June, inching closer to the ECB’s 2% target, which is considered optimal for the economy. But lately, that has become difficult. Inflation has been stagnant between 2% and 3% for months.
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