The European Central Bank to Keep Interest Rates Unchanged

The European Central Bank (ECB) is expected to maintain its current interest rates, following in the footsteps of the Federal Reserve who made a similar decision in September.

Breaking the pattern of tightening policies, this will be the first time in over a year that President Christine Lagarde and her colleagues choose not to make any adjustments. In August, the ECB raised rates by a quarter point, citing projections that indicated inflation would remain above 3% next year, surpassing the 2% target.

Given the weak growth forecast for next year, coupled with escalating oil prices due to Middle East tensions, the ECB's interest-rate cycle may have peaked. This situation presents a dual challenge: inflating energy costs that could drive up inflation while simultaneously slowing down the economy.

"We anticipate the ECB keeping rates on hold," remarked ING strategist Carsten Brzeski. "Given all the uncertainties, there hasn't been a better moment in the past 16 months for the ECB to take a pause than now."

Although the current inflation rate for the Euro region stands at 4.3%, it has significantly decreased from its level of over 10% a year ago. Yannis Stournaras, the governor of the Greek central bank, hinted in an interview with the Financial Times last week that the ECB might contemplate rate cuts by the middle of next year.

During the upcoming press conference in Athens, Greece, Lagarde may discuss further rate hikes as a means of maintaining control over inflation. Notably, this meeting is one of the rare occasions when the ECB's governing council convenes outside its usual headquarters in Frankfurt.