European Central Bank holds rates steady as economy shows resilience

The European Central Bank has kept interest rates on hold, as expected, at its latest meeting on Thursday.

The central bank held its key deposit facility rate at 2% for the third consecutive time, having last cut rates in June. The trim, which coincided with euro zone inflation hitting the ECB’s target rate of 2%, was part of a rate-cutting cycle that has brought rates down from last year’s record high of 4%.

The ECB said in a statement Thursday that “inflation remains close to the 2% medium-term target and the Governing Council’s assessment of the inflation outlook is broadly unchanged.”

“The economy has continued to grow despite the challenging global environment. The robust labour market, solid private sector balance sheets and the Governing Council’s past interest rate cuts remain important sources of resilience,” it said.

It cautioned, however, that “the outlook is still uncertain, owing particularly to ongoing global trade disputes and geopolitical tensions.”

While the euro zone inflation rate inched up to 2.2% in September, up from 2% the previous month, the rise was attributed to an increase in services prices and economists had said the central bank was likely to remain cautious about meddling with rates right now.

Expectations that the ECB would keep rates on hold were reinforced earlier Thursday when preliminary euro zone growth data showed the economy had grown 0.2% in the third quarter, from the previous three month period. The figure was above expectations and showed that economic activity remained resilient, despite prevailing uncertainty over business activity following U.S. trade tariffs.

ECB President Christine Lagarde told reporters that while the services sector continued to grow — boosted by strong tourism and a pick-up in digital services — manufacturing had been “held back by higher tariffs, still heightened uncertainty and a stronger euro.”