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European Central Bank Keeps Rates At Record Highs

By Stefan J. Bos, Chief International Correspondent Worthy News

FRANKFURT/BUDAPEST (Worthy News) – The European Central Bank (ECB) kept interest rates at the highest level in its two-and-a-half-decade history despite policymakers claiming progress in their battle against high inflation and other economic headwinds.

At a fourth consecutive meeting, the ECB decided to keep the deposit rate at 4 percent.

Officials were weighing how soon they could bring these figures but said they needed more proof of slowing price growth.

For now, strong wage growth was keeping domestic price pressures high, the bank said.

The ECB, which sets interest rates for the 20 countries that use the euro currency, has been cautious about cutting rates too quickly and reinvigorating inflationary pressures, according to sources familiar with bank policies.

The ECB has been criticized for what commentators called “printing money” for poorer, less disciplined member states of the eurozone, which they say contributed to the inflation in Europe.

Yet due to the improvement so far in slowing headline inflation, “we are more confident,” said Christine Lagarde, the ECB president, in Frankfurt, Germany. “But we are not sufficiently confident, and we clearly need more evidence.”

Last month, the annual inflation rate in the eurozone slowed to 2.6 percent, edging closer to the central bank’s 2 percent target.

That is much better than some non-eurozone members, such as Hungary, where last year inflation hit more than 20 percent.

Yet economists have warned of too much optimism in the eurozone, saying that the path to achieving the ECB’s inflation target remains marked by uncertainties.