ECB holds deposit rate at 2.00 percent

The European Central Bank's Governing Council decided to keep its three key interest rates unchanged, with the deposit facility rate remaining at 2.00 percent, the main refinancing operations rate at 2.15 percent, and the marginal lending facility rate at 2.40 percent.

While incoming information has been broadly consistent with the Council's previous assessment of the inflation outlook, it noted an intensification of upside risks to inflation and downside risks to growth.

The war in the Middle East has led to a sharp increase in energy prices, pushing up inflation and weighing on economic sentiment.

The implications for medium-term inflation and economic activity will depend on the intensity and duration of the energy price shock and its indirect and second-round effects.

The Governing Council remains committed to ensuring inflation stabilises at the 2 percent target in the medium term.

The euro area has shown resilience over recent quarters, entering this period of surging energy prices with inflation already near the 2 percent target.

While longer-term inflation expectations remain well anchored, those over shorter horizons have moved up significantly.

The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to policy.

Its interest rate decisions will be based on an assessment of the inflation outlook and surrounding risks, in light of incoming economic and financial data.

The Council reiterated that it is not pre-committing to a particular rate path.

Furthermore, the Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios are declining, and the Transmission Protection Instrument (TPI) remains available to counter unwarranted market dynamics.