Higher for Longer: The European Central Bank sticking to the ‘Higher for Longer’ regime decided to keep its interest rate unchanged at a record high on Thursday.  The ECB did not raise interest rates to tame the red-hot inflation. 

Financial markets are expecting a rate cut from 4 per cent as early as April, while ECB President Christine Lagarde has indicated it likely would happen this summer.

Christine Lagarde, president of European Central Bank has cautioned that the bank will make decisions based on the latest figures about the economy's health rather than making longer-term promises.

The ECB's statement dropped earlier wording that “domestic price pressures remain elevated” and noted that high rates are helping push inflation down. But it cautioned borrowing costs would stay high for “as long as necessary” without offering a future timetable.

Like the ECB, Norway's central bank kept rates steady on Thursday. The same day, the central bank in Turkey, which is suffering from out-of-control inflation of nearly 65 per cent, raised its key rate to 45 per cent, expected to be the last increase for some time.

With inflation falling in major economies, financial markets are frothing in hopes of cheaper credit that would boost business activity and stock prices.

Stock investors saw their holdings, such as those in US retirement accounts, soar in the last weeks of 2023 as the US Federal Reserve and ECB indicated that a rapid series of rate hikes was ending. Fed Chair Jerome Powell said officials discussed prospects for rate cuts at the bank's December meeting, and the US central bank has indicated it would cut its key interest rate three times this year.

With Reuters Inputs