European Central Bank holds deposit rate… annual 2.00%

JOON HYOUNG LEE

Summary

The European Central Bank held the deposit rate at 2.00%.
It said this rate hold maintains the gap between the policy rates of the European Central Bank, the U.S. Federal Reserve, and the Bank of Korea.
Markets are forecasting a possible 0.25 percentage point cut to the policy rate at the final meeting in December.

The European Central Bank (ECB) has held the three main policy rates, including the deposit rate.

On the 11th (local time), the European Central Bank held a monetary policy meeting in Frankfurt, Germany, and kept the deposit rate at 2.00%. The main refinancing rate and the marginal lending rate were also kept at 2.15% and 2.40%, respectively.

The European Central Bank bases its monetary policy on the deposit rate among policy rates. Since it changed its monetary policy direction in June last year, the ECB has cut policy rates by 2.00% percentage points in eight steps through last June. During this period, the deposit rate was lowered from 4.00% to 2.00%.

With this rate hold decision, the gap between the ECB's benchmark deposit rate and the U.S. Federal Reserve (Fed) policy rate (4.25∼4.50％) was maintained at 2.25∼2.50％ percentage points. It is a 0.50％ percentage point difference from the Bank of Korea's policy rate (2.50％).

The ECB raised its eurozone consumer price inflation forecast for this year from 2.0% to 2.1%, an upward revision of 0.1% percentage points. It also raised its economic growth forecast from 0.9% to 1.2%, an upward revision of 0.3% percentage points.

Markets expect the ECB to keep policy rates unchanged at next month's meeting and to cut policy rates by 0.25％ percentage points at the last meeting of the year in December.

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