FRANKFURT, Jan 22 (Reuters) – European Central Bank policymakers are in no hurry to adjust interest rates as inflation is hovering near target but abundant risks mean they need to be ready to move once again, the accounts of their December meeting showed on Thursday.
The ECB left its interest rate unchanged at 2% at the meeting and lifted growth projections, taken by markets as a signal that the bar for any further policy easing was exceptionally high.
Speaking since the meeting, the central bank’s chief economist Philip Lane has said that as long as the economy develops as projected, interest rate changes are unlikely to be on the agenda in the near term, confirming market bets that the bank would be on hold for some time after eight rate cuts in the year to last June.
“The Governing Council could be patient, although this should not be mistaken for being hesitant to act or being asymmetric,” the ECB said in the accounts. “Overall, the ECB was currently in a good place from a monetary policy point of view, but this did not mean the stance was to be seen as static.”
The ECB will next meet on February 5 and financial investors see no change in interest rates at all this year.
“Given the Governing Council’s medium-term orientation … the current market pricing of interest rates was seen as consistent with the latest fixings and in line with the Governing Council’s reaction function,” the ECB added.
Inflation, the ECB’s main focus, has been hovering on either side of the 2% target for most of the past year and projections show it near this level for years to come.
There may be some modest undershooting this year on lower energy prices but domestic inflation remains relatively high due to robust wage growth, supporting arguments that price growth will rebound back to target once lower energy costs get knocked out of base figures over time.
(Reporting by Balazs Koranyi; Editing by Toby Chopra)
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