The European Central Bank (ECB) kept its key interest rates unchanged on Thursday but announced that the slowdown in inflation could open the door for a relaxation of monetary policy, raising hopes for a potential interest rate reduction in June.

This decision marks the fifth consecutive time the Central Bank has frozen borrowing costs, with the deposit facility rate remaining at a historic high of 4%. The ECB announced that the rates of main refinancing operations, as well as the rates of the marginal lending facility and the deposit facility, will remain steady at 4.50%, 4.75%, and 4.00% respectively.

The ECB had previously increased rates at a record pace to curb soaring price increases. However, calls for the initiation of a rate-cutting cycle have grown as inflation declines and higher borrowing costs weigh on the 20-member single currency zone.

Eurozone inflation slowed down more than expected in March, reaching 2.4% - not far from the ECB's target of 2%. A rate cut this Thursday was widely considered unlikely, with officials repeatedly emphasizing their expectation for more data available only at their June session.

In its announcement, the ECB revised its language, stating that most measures of underlying inflation are easing, and the rise in wages - a particular concern in recent months - "is moderating." Specifically, the ECB notes that "inflation continued to decrease, driven by lower food and goods price inflation."

"Most underlying inflation indicators are receding, wage growth is gradually moderating, and businesses are absorbing some of the labor cost increases into their profits," it adds.

The announcement also states that "financing conditions remain restrictive, and previous interest rate hikes continue to exert a dampening effect on demand, contributing to pushing inflation downwards."

However, the ECB remarks that "domestic price pressures are strong and keep service price inflation at high levels."

Additionally, the announcement states that the Governing Council is "determined to ensure that inflation returns to its medium-term target of 2% in a timely manner."

"It considers that the key ECB interest rates are at levels that are significantly contributing to the ongoing disinflationary process," the announcement reads, adding that "future decisions by the Governing Council will ensure that its policy rates remain sufficiently restrictive for as long as necessary."