ECB Keeps Benchmark Rate Unchanged, Maintains Deposit Rate at 2.25%

AFP Yonhap News Agency

The European Central Bank (ECB) has kept all three key policy rates unchanged, as widely anticipated by the market.

On July 23 local time, the ECB held a monetary policy meeting in Frankfurt, Germany, and decided to keep the deposit rate at an annual 2.25%. The main refinancing operations rate, which serves as the benchmark rate, remained unchanged at 2.40% per annum, and the marginal lending facility rate was also held steady at 2.65% per annum.

This decision maintains the spread between the ECB's benchmark deposit rate and South Korea's base rate (2.75%) at 0.50 percentage points. The difference with the U.S. Federal Funds Rate (3.50–3.75%) also remains unchanged at 1.25–1.50 percentage points.

Last month, the ECB raised its policy rates by 0.25 percentage points each, in response to mounting inflation concerns stemming from war in the Middle East. This was the first rate hike in about two years and nine months since September 2023.

The eurozone's (comprising 21 euro-using countries) consumer price inflation was 1.7% year-on-year in January, before the start of the war, but climbed to 3.2% in May. Although inflation moderated to 2.8% last month amid some stabilization in international oil prices, it remains above the ECB's 2.0% target.

Market participants believe the future course of the ECB's monetary policy will be heavily influenced by international oil prices. With recent escalation in military conflict between the United States and Iran pushing crude oil prices higher again, there are forecasts of up to three additional rate hikes.

In a statement, the ECB noted, "The energy price outlook is similar to the baseline scenario in June, but remains at a high level compared to before the Middle East conflict," adding, "We are closely monitoring the intensity and duration of this shock, as well as its secondary spillover effects."

The ECB's decision to keep the benchmark rate unchanged reflects consideration of both inflation and uncertainty in international oil prices. Going forward, energy price trends are expected to play a key role in shaping its monetary policy.

This content was produced with the assistance of AI translation services.