The European Central Bank keeps interest rates high to ensure inflation is under control

FRANKFURT, Germany (AP) — The European Central Bank kept its benchmark interest rate unchanged at a high level Thursday, keeping credit expensive for businesses and consumers as it seeks to make sure inflation is under control before cutting loan costs, an action. Planned for later in the year.

The question is, how much further than that. Financial markets expect the interest rate, currently at 4%, to be cut by April, while European Central Bank President Christine Lagarde has indicated that this will happen in the middle of the year.

Analysts expect him to say in his press conference in the coming hours that the bank needs more evidence that painful inflation – which has made everything from food to fuel more expensive – has been broken.

Lagarde warned that the bank would make its decisions based on the latest figures on the health of the economy rather than making long-term promises.

The ECB statement removed the phrase that “domestic price pressures remain high” and noted that higher interest rates help lower inflation. But he indicated that credit costs would remain high “as long as necessary,” without giving deadlines.

Like the European Central Bank, the Norwegian central bank left interest rates unchanged. Meanwhile, Turkey's central bank, grappling with uncontrolled inflation of 65%, raised its benchmark interest rate to 45%, which is expected to be the last increase for some time.

With inflation falling in the largest economies, financial markets are eagerly awaiting lower credit rates that would stimulate business activity and lift stock prices.

Equity investors, such as U.S. retirement account holders, saw their holdings rise sharply in the final weeks of 2023, as the Federal Reserve and European Central Bank signaled the end of a series of interest rate hikes. Federal Reserve Chairman Jerome Powell said expectations of lower interest rates were discussed at the December meeting, and the US central bank expects to cut interest rates three times this year.