The European Central Bank held its deposit facility rate at 2.25% on Thursday, keeping monetary policy on hold while leaving open the possibility of further tightening at its September meeting. The main refinancing rate was kept at 2.40% and the marginal lending rate at 2.65%.
President Christine Lagarde told reporters that the decision by the Governing Council had been unanimous, and that policymakers continued to monitor the intensity and duration of the energy shock stemming from the Middle East. Portfolios accumulated under the asset purchase programme and the pandemic emergency purchase programme are continuing to run down without reinvestments.
UNANIMOUS HOLD, ENERGY SHOCK IN FOCUS
Lagarde also told reporters that some governors had asked whether a hike should be considered.
The Governing Council said uncertainty remains high and the full inflationary impact of the energy shock has yet to play out.
The Governing Council said it is not pre-committing to a particular rate path and will follow a data-dependent and meeting-by-meeting approach.
BALANCE SHEET RUN-OFF CONTINUES
In parallel with the rate decision the Governing Council confirmed that the APP and PEPP portfolios continue to shrink as maturing securities are not being reinvested. The ECB said the portfolios are declining at a measured and predictable pace.
Lagarde told the press conference that the Governing Council was committed to setting monetary policy to ensure that inflation stabilises at its 2% target in the medium term.
Traders priced in another quarter-point increase in September, CNBC reported. A Reuters poll published the week before the meeting found economists expected a July hold, with the energy-price resurgence pointing to a September hike.
The ECB published its monetary policy decisions and monetary policy statement on its website. The next monetary policy meeting was scheduled for 10 September.
The statement said the risks to the inflation outlook are to the upside and that the longer energy prices stay high, the more likely they are to drive up broader inflation through indirect and second-round effects.