ECB Maintains Unchanged Interest Rates.

The European Central Bank stated that if the current interest rates are maintained for a prolonged period, they would drive inflation towards the 2% target.  

Highlights

•  The European Central Bank did not make any changes to the interest rate, keeping it steady at 4.5%.
• The central bank indicated that interest rates have reached a level that is adequately restrictive.
• The EUR/USD pair reached new highs today as traders continued to concentrate on a dovish Fed.  

On December 14, the European Central Bank (ECB) announced its decision on interest rates, choosing to maintain them at their current levels, consistent with the expectations of analysts.

According to the latest economic forecasts, headline inflation is projected to be 5.4% in 2023, 2.7% in 2024, and 2.1% in 2025. Economic growth remains under pressure due to elevated interest rates, although the Eurosystem staff anticipates growth to increase from 0.6% in 2023 to 0.8% in 2024.

The ECB stated, "Based on its current assessment, the Governing Council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal."

In simpler terms, the ECB believes that the cycle of rate hikes has concluded. This aligns with the decreasing inflation resulting from lackluster economic performance in the Eurozone.

Following the ECB's decision, the EUR/USD pair continued to rise as traders speculated that the Federal Reserve would aggressively reduce rates, which is negative for the US dollar.

Gold settled close to the $2035 mark as traders focused on accommodative central bank stances. Both the Fed and ECB hinted at the conclusion of their rate hike cycles, a positive signal for gold and other precious metals.

The DAX index retreated from its intraday peaks as traders secured profits following a strong rally from October lows.