Following its July policy meeting, the ECB lifted key interest rates by 25 basis points (bps), as generally expected. The interest rate on the primary refinancing operations. As well as the interest rates on the marginal lending facility and the deposit facility. Will be raised to 4.25%, 4.5%, and 3.75%, respectively, as a result of this decision.
The ECB emphasized in its policy statement that future actions would guarantee. That rates remain at suitably restrictive levels for as long as required to achieve a timely return of inflation to the 2% medium-term objective.
ECB policy statement’s key takeaways
“In particular, interest rate decisions will continue to be based on its assessment of economic conditions.” Inflation prognosis based on incoming economic and financial data, underlying inflation dynamics, and monetary policy transmission strength.”
“The ECB also decided to set the minimum reserve remuneration at 0%.”
“This decision will preserve the effectiveness of monetary policy by maintaining the current degree of control over monetary policy stance and ensuring full pass-through of interest rate decisions to money markets.”
“At the same time, it will improve monetary policy efficiency by reducing the overall amount of interest that needs to be paid on reserves in order to implement an appropriate stance.”
“Until at least the end of 2024, the ECB intends to reinvest principal payments from maturing securities purchased under the program.”
The market’s reaction
The immediate reaction to the ECB’s stance put the Euro under mild selling pressure. The EURUSD pair was trading at 1.1100 at the time of writing, up 0.25% on the day.
