The European Central Bank has paused its toughest cycle of interest rate increases since the launch of the euro, amid growing fears over the eurozone economy, judging previous rises are doing enough to tackle inflation.
In a decision widely expected in financial markets, the ECB left its key policy rates unchanged for the first time in more than a year – halting a round of 10 previous increases in the cost of borrowing.
It comes as concerns grow over the impact of previous increases on European economies, with warnings of a recession in the single-currency area led by a downturn in Germany, where a manufacturing slump saw business activity contract for a fourth straight month in October.
With inflation at more than twice the central bank’s target, economists expect borrowing costs will remain at elevated levels for a prolonged period to cool price growth across the 20-country bloc.
The latest decision leaves the ECB’s deposit rate, paid on commercial bank deposits, at 4% – the highest since the euro was launched in 1999. Its main refinancing operations rate, providing the bulk of liquidity to the banking system, was left unchanged at 4.5%, while the marginal lending facility rate, offering overnight credit to banks, was left at 4.75%, Guardian reports.
