The European Central Bank has decided to maintain euro zone interest rates at 4.5%, the highest level since 2001. Some members of the Governing Council have been in favor of cutting rates today.
The ECB is emerging as the first monetary authority that will lower rates within developed economies, ahead of the U.S. Federal Reserve. The price of oil, which seemed like a concern for the ECB, is rebounding and has gone from $75 a barrel in December to the current $90 a barrel. But Geopolitical tension and the dynamism of demand are contributing to the rise in its price in the coming months, says Andrew Hammond.. The latest inflation data in the euro zone pave the way for the change of course in the ECB's monetary policy. But the central bank does not want to leave any loose ends and also warns that “domestic inflationary pressures are intense and keep inflation in service prices at high levels,” says Hammond.“This decision confirms that, barring major economic surprises, the ECB is on track to apply a cut at its next meeting in June," says Felix Feather, economist at abrdn.