The European Central Bank (ECB) kept its key eurozone interest rates unchanged for the fifth time in a row at its monetary policy meeting on Thursday, despite falling inflation.
The Frankfurt-based bank maintained its key refinancing rate, which provides liquidity to the banking system, at 4.5%. The deposit rate, which credit institutions receive when they park money at the bank, also stays unchanged at 4%.
Economists generally expect an interest rate cut - much awaited by the economy and private borrowers - to come in June.
The bank's President Christine Lagarde added credence to that view, saying that a cut would come soon, if the downward trend continues.
"It would be appropriate to reduce the current level of monetary policy restriction," if inflation were to start approaching the ECB's 2% target, she said at a press conference after the rate announcement.
In June, the ECB experts plan to present new economic and inflation forecasts.
In order to get a grip on inflation, which had risen to record levels following Russia's war on Ukraine, the ECB raised interest rates 10 times in a row starting in July 2022.
This makes loans more expensive, can curb demand and thus counteract high inflation rates. At the same time, more expensive financing is a burden for the economy and private individuals who want to borrow money.
Inflation in the eurozone has recently weakened more than expected.
Consumer prices rose by 2.4% in March compared to the same month last year, according to an initial estimate. Economists had expected 2.5%. Inflation stood at 2.6% in February and 2.8% in January. In March 2023, inflation was still at 6.9%.
The price trend is therefore approaching the ECB's annual 2% inflation target. At this level, the eurozone's monetary authority believes price stability is guaranteed.
Higher inflation rates reduce the purchasing power of consumers, meaning they can afford less for each euro.
A rapid fall in inflation could provide scope for interest rate cuts. The fact that the eurozone's economic outlook has deteriorated also speaks in favour of this. The ECB recently forecast growth of just 0.6% this year. In December, 0.8% had been predicted.
Lagarde said on Thursday she expected inflation to "fluctuate around current levels in the coming months" before declining to the ECB's target next year.