The European Central Bank’s (ECB) governing council announced on Thursday that it has decided to keep the three key ECB interest rates unchanged, with inflation currently at the ECB’s medium-term target of 2 per cent.

The governing council stated that incoming information is broadly in line with its previous assessment of the inflation outlook.

Domestic price pressures have continued to ease, supported by slower wage growth.

The council mentioned that the euro area economy has proven resilient overall despite a challenging global environment.

This resilience is partly attributed to the impact of previous interest rate cuts by the ECB.

However, the governing council warned that the external environment remains exceptionally uncertain.

“Especially because of trade disputes,” it added.

The ECB reiterated its commitment to stabilising inflation at the 2 per cent target in the medium term.

It emphasised that it will adopt a data-dependent and meeting-by-meeting approach to determining its monetary policy stance.

“In particular, the governing council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it,” it said.

This will be done in light of incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission.

The ECB underscored that it is not pre-committing to a particular rate path.

The interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will remain at 2.00 per cent, 2.15 per cent and 2.40 per cent respectively.

Regarding its broader monetary policy tools, the governing council confirmed that the Asset Purchase Programme (APP) and the Pandemic Emergency Purchase Programme (PEPP) portfolios are continuing to decline at a measured and predictable pace.

This is because the Eurosystem no longer reinvests the principal payments from maturing securities.

The ECB reaffirmed its readiness to act if needed to support the smooth functioning of monetary policy transmission.

“The governing council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises at its 2 per cent target in the medium term,” it said.

It also highlighted the availability of the Transmission Protection Instrument (TPI).

The TPI is designed to counter unwarranted, disorderly market dynamics that could threaten the transmission of monetary policy across euro area countries.

This, the ECB said, enables the governing council to more effectively deliver on its price stability mandate.