The European Central Bank (ECB) meeting in Greece, left interest rates unchanged on Thursday, after an unprecedented streak of 10 consecutive rate hikes.
The ECB has lifted rates by a combined 4.5 percentage points since July 2022 to combat runaway price growth but hinted last month that it would pause as record-high borrowing costs are starting to work their way through the economy.
The benchmark deposit rate is now 4 percent — four-and-a-half percentage points above its all-time low of minus 0.5 percent.
Price pressures are finally easing and inflation has more than halved in a year while the economy has slowed so much that a recession may already be underway, boosting market bets that rate hikes are finished and the ECB’s next move will be a cut.
Looking to keep all of its options open, the ECB said it would follow a “data-dependent” approach and decisions would be based on incoming data.
“The key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to (the inflation) goal,” the bank said in a statement after meeting in Athens for the first time in 15 years.
ECB President Christine Lagarde praises Greece
She also noted the efforts of the Greek people, during a formal dinner provided in her honor by Bank of Greece (BoG) Governor Yannis Stournaras, who is hosting the meeting at BoG premises.
Greece’s economy, Lagarde said, could serve as an inspirational example in very uncertain times in terms of resilience, and as an example of the importance of being part of a common European fate.
From 2008 to 2016, the ECB head said, Greece’s GDP shrank by over a quarter, unemployment rose by 20 percentage points at its apex, and catastrophe hit again with the coronavirus pandemic just as the economy was starting to recover and reforms give results.
Greece has been at the forefront of global challenges that Europe faces, including climate crisis and the migration crisis, she also added.
The resilience of the country was noteworthy however, as the current per capita GDP is 10% above the pre-pandemic level – a much stronger performance than the Eurozone in total – and unemployment has also dropped dramatically, to 10.9% in August, the lowest it has been since the end of 2009.
It is not just the resilience of the Greek economy, she added, it is also the resilience of the Greek people that is noteworthy, remaining committed to Europe through difficult times.