ECB and BOE Keep Interest Rates Unchanged without Signals for Future Cuts

The European Central Bank (ECB) and the Bank of England (BOE) left rates unchanged on Thursday, in line with market expectations.

Deposit rate for the ECB was maintained at 4.5% for the second meeting in a row as inflation showed signs of slowing down in the bloc. However, the ECB revised down average real GDP expanding 0.6% in 2023, a slight decline from a prior estimate of 0.7%. The meeting also cut 2024 GDP growth to 0.8% from 1%, previously. Growth for 2025 remained unchanged at 1.5%. 

Expectations for average inflation in 2023 are at 5.4%, and forecast to drop to 2.7% and 2.1%, respectively in 2024 and 2025. 

The ECB noted that it will step up its exit from EUR1.7 trillion of pandemic-era stimulus and also intends to slow PEPP reinvestments in the second half of next year as well as discontinue reinvestments under PEPP at the end of 2024.

In addition, ECB President Christine Lagarde noted that the committee did not discuss rate cuts at all, but markets are pricing in a little more than five cuts next year.


In the meantime, the BOE also left its bank rate unchanged at 5.25% on Thursday as well, which was in line with expectations. As inflation remained high at 4.6% in October, UK money markets pushed back BOE’s first rate cut from May to June 2024.