The Governing Council of the European Central Bank (ECB-European Central Bank) left the current level of interest rates at its meeting in Athens, Greece, or, as stated at the Thursday press conference on October 26 of this year, the President of the ECB, Mrs. Christine Lagarde, that the Governing Council decided to keep stable level of interest rates in the eurozone. Furthermore, the ECB repeated its message that interest rates at the current level will help bring inflation to its inflation target of two percent year-on-year if they are “maintained for a sufficiently long time.”
The financial market responded to this fact, which was expected by most investors and traders, without significant volatile fluctuations in the exchange rate of the single European currency, the euro (EUR) against other major world currencies and especially against the US dollar (USD). Currently, during the European Friday morning on October 27, 2023, at approximately 11:16 CET, the so-called global currency pair of the single European currency, the euro (EUR) and the US dollar, as world reserve currencies, traded within the forex operations of the foreign exchange market in mutual exchange rate at a value of 1.056 USD per EUR with so far only a de facto technical growth of the EUR by + 0.01% of the exchange rate against the USD. This mutual exchange rate was achieved in a situation where the exchange value of USD measured by the dollar index DXY (US Dollar Currency Index) on the indicated day and time was at a point level of 106.55 USD points with a daily decrease of -0.05% points. values according to this index, which compares the value of the USD with another six major world currencies.
Thus, on Thursday, October 26, 2023, the European Central Bank ended its increase in interest rates, despite new pro-inflationary risks, in particular the risk of inflation arising from the oil markets in the middle of the war between Israel and Hamas, where there is still a real danger of expansion of this war conflict to almost the entire Middle Eastern region. The European Central Bank’s key interest rate, namely the deposit rate, is expected to remain at a record high of 4% per year, having undergone 10 consecutive increases that began in July of last year 2022, pushing rates back into positive territory for the first time since 2011 values. The ECB’s Governing Council said recent information confirmed its medium-term inflation outlook of 2.1% year-on-year. “Inflation is still expected to remain too high for too long and domestic price pressures remain strong. At the same time, inflation fell significantly in September this year 2023, also due to a strong benchmark base, and most measures of core inflation continued to ease,” the ECB said in a statement.
In interviews, members of the ECB’s Governing Council emphasized the “higher for longer” rate report, while insisting that an inflationary shock could prompt them to hike again as they seek to dampen market expectations of a rate cut from mid-2024. , how long rates have to stay at current levels, ECB President Christine Lagarde said: “We are referring to a timely, long enough time. But in the same breath, I say we will be dependent on data. At this point in our fight against inflation and after ten consecutive hikes, now is no time for guidance.” Ms. Lagarde said the topic of rate cuts was not discussed by the Governing Council. “Even the discussion of the cut is completely, completely premature. At this moment, when we say we are stable, we have to hold on,” said ECB chief Ms. Lagarde. The ECB must evaluate data in areas such as wage negotiations, which will not be published until 2024, the ECB chief added. Based on these announcements, analysts predict the development of the EUR/ECB currency pair well below the exchange rate of USD 1.10 per EUR, and a further decrease in the exchange value of EUR against the USD can be expected.