Monetary policy decisions

The Governing Council today decided to keep the three key ECB interest rates unchanged. Since the last Governing Council meeting in January, inflation has declined further. In the latest ECB staff
projections, inflation has been revised down, in particular for 2024 which mainly reflects a lower
contribution from energy prices. Staff now project inflation to average 2.3% in 2024, 2.0% in 2025 and 1.9% in 2026. The projections for inflation excluding energy and food have also been revised down
and average 2.6% for 2024, 2.1% for 2025 and 2.0% for 2026. Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages. Financing conditions are restrictive and the past interest rate increases continue to weigh on demand, which is helping push down inflation. Staff have revised down their growth projection for
2024 to 0.6%, with economic activity expected to remain subdued in the near term. Thereafter, staff
expect the economy to pick up and to grow at 1.5% in 2025 and 1.6% in 2026, supported initially by
consumption and later also by investment.

The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. Based on its current assessment, the Governing Council considers that the key ECB
interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial
contribution to this goal. The Governing Council’s future decisions will ensure that policy rates will be
set at sufficiently restrictive levels for as long as necessary.

The Governing Council will continue to follow a data-dependent approach to determining the
appropriate level and duration of restriction. In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and
financial data, the dynamics of underlying inflation and the strength of monetary policy transmission.