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The European Central Bank on Thursday as expected kept interest rates steady, with the deposit rate staying at 4%.
The last reading of eurozone manufacturing PMI was 43, on a scale where readings below 50 indicate deteriorating conditions, while consumer sentiment also is in negative territory. Inflation meanwhile has slowed to 4.3% year-over-year in September, from 5.2% in August.
“Inflation is still expected to stay too high for too long, and domestic price pressures remain strong. At the same time, inflation dropped markedly in September, including due to strong base effects, and most measures of underlying inflation have continued to ease,” the ECB said.
The ECB said its past rate hikes are being transmitted “forcefully” into financing conditions, which is dampening demand and pushing down inflation.
“Based on its current assessment, the Governing Council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal. The Governing Council’s future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary,” the ECB said.
