ECB Keeps Rates High, But Cuts Expected in 2024

Frankfurt, Dec 14 (AP) The European Central Bank kept its key interest rate at a record high on Thursday and is now facing expectations it will start cutting borrowing costs next year to support the shrinking economy.

It follows similar decisions this week by the US Federal Reserve, Bank of England and Swiss National Bank to leave rates unchanged. The Fed also signaled it could make three interest rate cuts next year.

The ECB said it's keeping its benchmark rate at 4 per cent because inflation was “likely to pick up again temporarily in the near term.”

Central banks around the world drastically raised rates to contain inflation that broke out in the wake of the COVID-19 pandemic and Russia's invasion of Ukraine. They're now trying to balance keeping rates high enough for long enough to make sure inflation is contained against the risk that higher borrowing costs could throw their economies into recession.

Inflation has fallen more than expected in the 20 European Union countries that use the euro currency, to 2.4 per cent in November from a peak of 10.6 per cent in October 2022. That's not too far from the ECB's goal of 2 per cent considered best for the economy. (AP)