European Central Bank holds key interest rates steady amid falling inflation

March 7 (UPI) -- The European Central Bank Thursday decided to leave three key interest rates unchanged, citing falling inflation.

Refinance interest rates were left in place at 4.5% while marginal lending facility rates remained at 4.75% and deposit rates at 4%.

"We are determined to ensure that inflation returns to our 2% medium-term target in a timely manner," ECB President Christine Lagarde said during a press conference. "Based on our current assessment, we consider that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal."

Inflation in February stood at 2.6% with the ECB on Thursday revising projections for inflation in 2024 down to 2.3%, with the 2025 inflation rate expected to be 2.0%, lowering further to 1.9% in 2026.

"Food price inflation fell again, to 5.6% in January and 4 % in February, while energy prices in both months continued to decline compared with a year ago but at a lower rate than in December," the ECB said in a statement.

Excluding food and energy, the revised inflation projections are 2.6% for 2024, 2.1% for 2025 and 2.0% for 2026.

The bank said the European economy remains weak with consumers holding back on spending, fewer exports and lower investment, all reflecting lower economic demand.

But the bank expects "a gradual recovery over the course of this year."

Although inflation is dropping the bank said, "Financing conditions are restrictive and the past interest rate increases continue to weigh on demand, which is helping push down inflation."

As a result, the bank said economic growth is expected to be 0.6% in 2024. For 2025, growth is anticipated to be 1.5% in 2025 and 1.6% in 2026.