ECB Meets Expectations As Rates Held At 4%

The central bank's governing council noted inflation had dropped "markedly" in September, falling from 5.2% in August to 4.3%.

"Past interest rate increases continue to be transmitted forcefully into financing conditions," it said in a statement today.

Economists forecast BoE to hold rates at 5.25% through to spring 2024

The ECB's hiking cycle began in July 2022, with ten consecutive hikes made to bring its deposit facility rate to 4%. Following the pause last month, it is widely expected that the central bank has ended its hiking cycle.

In its decision today, the governing council said that rates are at levels that, "maintained for a sufficiently long duration, will make a substantial contribution" to bringing inflation back down to the 2% target.

ING global head of macro Cartsen Brzeski described the decision as a "no-brainer", noting that the ‘higher for longer' principle had been stressed more than previously in the central bank's statement.

"The economic situation in the eurozone is deteriorating stronger and faster than the ECB had anticipated. The rise in bond yields since the September meeting has strengthened the impact of the ECB's tightening efforts so far," he added.

Richard Garland, chief investment strategist at Omnis Investments, said: "The ECB has officially joined the Pause Party of central bankers in wait and watch mode.

"This makes sense - inflation is falling quite sharply and they had signalled last month that the direction of travel for rates will be sideways. Higher for longer is also be a mantra the ECB will be keen to repeat for a while, ensuring their work to date won't be undone by markets anticipating rate cuts too soon."

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