ECB Pauses Rate Increases As Inflation Slows

The European Central Bank maintained its benchmark interest rates unchanged amid slowing inflation.

The interest rate on the deposit facility was kept at 4%, still the highest level since the euro was introduced in 1999. The decision matched economists expectations.

"Inflation is still expected to stay too high for too long, and domestic price pressures remain strong," the ECB said Thursday in the statement that announced the decision. "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 ECB targets annual inflation of 2%.

The bank raised its rates 10 times since it started the tightening cycle in July 2022. The benchmark rate was then at minus 0.5%, a record low.

Annual inflation in the eurozone slowed to 4.3% in September, the slowest pace since Oct. 2021.

At the same time, recent data point to economic challenges. The area's Composite Purchasing Managers' Index (PMI) fell to 46.5 in October from September's 47.2.

For Germany, the PMI was even lower: 45.8. A reading below 50 indicates business activity is contracting.