The European Central Bank (ECB) decided not to raise interest rates for the first time in 15 months due to increasing evidence of a worsening economic downturn in Europe and geopolitical tensions. The benchmark interest rate in the eurozone was kept at 4%, its highest level since the currency was launched. This decision follows data showing declining inflation and a slowdown in economic activity. ECB President Christine Lagarde stated that the euro area economy is expected to remain weak for the rest of the year and that the risks to economic growth are tilted downwards. The ongoing conflicts in Ukraine and the Middle East could further dampen growth and make energy prices less predictable. Recent surveys have shown a significant decline in output and a contraction in the eurozone economy, with Germany potentially already in recession. Additionally, demand for business loans and mortgages has fallen sharply, leading to tightened credit standards. The ECB aims to bring down inflation to its 2% target and while further rate hikes are not ruled out, interest rates are considered high enough to achieve this goal if maintained for a sufficient duration. It is unlikely that there will be additional rate increases in the near future, and interest rates are expected to remain at their current levels well into next year.
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