Monetary policy decisions

The European Central Bank's Governing Council decided to maintain the three key interest rates unchanged at their June levels of 2.25%, 2.40%, and 2.65% respectively. The decision comes amid high uncertainty and a volatile outlook for energy prices, which remain close to June staff projections yet exceed pre-conflict levels. While the full inflationary impact of the energy shock has yet to materialize, the Governing Council is closely monitoring its intensity and duration, as well as any indirect and second-round effects.

Commitment to ensuring that inflation stabilises at its 2% target in the medium term remains strong. The Governing Council will adopt a data-dependent, meeting-by-meeting approach to determining the appropriate monetary policy stance, based on assessments of the inflation outlook, risks surrounding it, and incoming economic and financial data. They are not pre-committing to a specific rate path.

The Eurosystem's Asset Purchase Programme (APP) and Multi-Year Asset Purchase Facility (PEPP) are gradually declining as the Eurosystem no longer reinvests principal payments from maturing securities. The Transmission Protection Instrument is available to address unwarranted, disorderly market dynamics that could hinder monetary policy transmission across euro area countries, enabling the Governing Council to effectively deliver on its price stability mandate.

In light of these decisions, the President of the ECB will provide additional insights during a press conference at 14:45 CET today. The Governing Council stands ready to adjust all of its instruments within its mandate to achieve the 2% inflation target and preserve the smooth functioning of monetary policy transmission.