The outcome of the European Central Bank’s monetary policy decision-making governing council meeting, announced by the ECB president, Christine Lagarde, in Frankfurt on 11 April 2024, the decision to keep the three key ECB interest rates unchanged. However, the door was left open for rate cuts at the next policy-setting meeting in June.

Lagarde’s opening remarks included the statement, “The governing council today decided to keep the three key ECB interest rates unchanged,” and she reiterated in a statement the council’s commitment to “ensure that inflation returns to its 2% medium-term target in a timely manner.”

This decision had been widely by market experts and economists. The three key interest rates--the main refinancing operations, the marginal lending facility, and the deposit facility--will remain unchanged at 4.50%, 4.75% and 4.00%, respectively.

Lagarde noted that several indicators of underlying inflation in the euro area are easing, wage growth is gradually moderating and firms are absorbing some of the rise in labour costs in their profits. Additionally, financing conditions remain restrictive and past interest rate increases continue to impact demand, contributing to downward pressure on inflation. However, strong domestic price pressures persist, particularly in services price inflation, stated Lagarde.

Providing a glimpse into potential interest rate adjustments, Lagarde suggested that if underlying inflation dynamics and the strength of monetary policy transmission further increase confidence that inflation is converging to the 2% target in a sustained manner, “it would be appropriate to reduce the current level of monetary policy restriction.” Nonetheless, the governing council will maintain a data-dependent and meeting-by-meeting approach to determine the appropriate level and duration of restriction, and the ECB is “not pre-committing to a particular rate path,” concluded Lagarde.

The rate-setting body will hold its next meeting on 6 June.