ECB STATEMENT: Rates unchanged, as expected; says it is well positioned to navigate the current uncertainty

RATES:

• ECB Governing Council holds three key interest rates unchanged
• Deposit facility rate held at 2.00% (exp. 2.00%)
• Main refinancing operations rate held at 2.15% (exp. 2.15%)
• Marginal lending facility rate held at 2.40% (exp. 2.40%)

GUIDANCE:

• ECB not pre-committing to a particular rate path
• Governing Council to follow data-dependent, meeting-by-meeting approach to policy stance
• Interest rate decisions to be based on inflation outlook and risks, incoming economic and financial data, underlying inflation dynamics, and strength of monetary policy transmission
• Governing Council stands ready to adjust all instruments within its mandate to ensure inflation stabilises at 2% in the medium term
• Transmission Protection Instrument available to counter unwarranted, disorderly market dynamics that pose a serious threat to monetary policy transmission

INFLATION:

• Upside risks to inflation have intensified
• Euro area entered current period with inflation at around the 2% target
• Shorter-horizon inflation expectations have moved up significantly
• Longer-term inflation expectations remain well anchored
• War in the Middle East has led to a sharp increase in energy prices, pushing up inflation
• Longer the war continues and energy prices remain high, the stronger the likely impact on broader inflation

ECONOMY:

• Downside risks to growth have intensified
• War in the Middle East weighing on economic sentiment
• Euro area economy has shown resilience over recent quarters
• Implications of war for medium-term inflation and activity will depend on intensity and duration of energy price shock and scale of indirect and second-round effects

COMMENTARY:

• Governing Council says incoming information broadly consistent with its previous assessment of the inflation outlook
• Governing Council says it remains well positioned to navigate the current uncertainty