ECB leaves interest rates on hold, as expected

The European Central Bank left interest rates on hold on Thursday, as widely expected, after 10 consecutive hikes.

The Bank left its key deposit and refinancing rates unchanged at 4.00% and 4.50%, respectively, in line with consensus expectations.

The marginal lending facility rate was also left on hold, at 4.75%, as expected.

The ECB said in a statement: "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 Governing Council’s past interest rate increases continue to be transmitted forcefully into financing conditions. This is increasingly dampening demand and thereby helps push down inflation.

"The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. 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."

Eurozone inflation fell to 4.3% in September from 5.2% in August.

Carsten Brzeski, global head of macro at ING, said it was a "no-brainer pause".

"After 10 consecutive hikes, the ECB's decision to leave policy rates unchanged should have been an easy one. The ‘higher for longer’ principle was stressed a bit more than at the September meeting, with the central bank saying it would ‘continue to follow a data-dependent approach to determining the appropriate level and duration of restriction’," he said.

"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. At the same time, however, the events in Israel and Gaza as well as the roller coaster ride of oil prices reminded everyone about the uncertainty and imprecision of inflation forecasts. If in doubt, cut it out is not only a golden rule for editors but also an often-practised principle of central bankers. If in doubt, just pause."