ECB keeps interest rates at record high

Specifically, the ECB kept its key interest rate at 4% and adjusted its message to reflect continued decline in inflation over the past year and a half as well as issued new economic forecasts.

Speaking to reporters after the decision, ECB President Christine Lagarde said: “We are making good progress towards our inflation target, but we are not yet confident.” Ms. Lagarde said things would become clearer in June.

Some sources familiar with the matter said the ECB is unlikely to cut interest rates before its June 6 meeting because important wage data will be released in May.

The ECB said that inflation had continued to decline since its last Governing Council meeting in January 2024. Although most measures of core inflation have declined, price pressures in the euro area remain high, partly due to strong wage growth. The ECB also reiterated that future policy decisions will partly depend on the path of core inflation.

In its quarterly economic forecasts, the ECB cut its inflation forecast for this year from 2.7% to 2.3%. This means the ECB could hit its 2% inflation target this year, rather than by 2025 as previously expected.