The European Central Bank (ECB), as expected, kept interest rates steady in its recent decision by the Governing Council. However, the ECB's projections for subdued growth and a decrease in inflation could ultimately lead to reductions in interest rates, as pointed out by analysts in their initial comments on the central bank's announcement.

The three key interest rates are as follows: the deposit facility rate at 4%, the main refinancing operations rate at 4.5%, and the marginal lending facility rate at 4.75%.

The ECB estimates that inflation in the eurozone will be at 2.3% this year, declining to the target of 2% in 2025 and 1.9% in 2026.

Regarding core inflation (excluding energy and food prices), it is projected to be at 2.6% this year, 2.1% in 2025, and 2% in 2026. "Although most components of underlying inflation have further declined, domestic price pressures remain high, partly due to the strong increase in wages. Financing conditions are restrictive, and previous interest rate hikes continue to weigh on demand," the ECB's announcement stated.

The ECB expects economic pressures to persist and has revised its growth forecast for 2024 downwards to 0.6%. It anticipates a recovery to 1.5% in 2025 and 1.6% in 2026, initially driven by consumption and subsequently by investments.

Regarding interest rates, the Governing Council notes that it believes they are "at levels that, if maintained for a sufficient period, will contribute decisively to returning inflation to 2%."