UPDATE - European Central Bank keeps interest rates unchanged

UPDATES WITH DETAILS FROM ECB STATEMENT; ADDS BACKGROUND DATA

By Ovunc Kutlu

ANKARA (AA) – The European Central Bank (ECB) on Thursday kept its key interest rates unchanged, despite inflation in Europe rising at its fastest pace since 2008.

"The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50%, respectively," the ECB said in a statement.

The ECB said it expects the key interest rates "to remain at their present or lower levels until it sees inflation reaching 2%," and it estimates that inflation will stabilize at that level over the medium-term.

The bank also said its net purchases will continue at a monthly pace of €20 billion (nearly $23.2 billion).

The ECB's decision comes despite inflation increasing at its fastest rate in 13 years.

The euro area inflation rate came in at 3.4% in September on an annual basis, driven by higher energy prices, latest Eurostat figures showed. The annual inflation rate in August was 3%.

Annual inflation in the EU jumped to 3.6% in September, up from 3.2% in August, according to the bloc's statistical authority.

The ECB's €1.85 trillion ($2.14 trillion) Pandemic Emergency Purchase Program (PEPP) has been providing liquidity to the markets and supporting European economies.

Any change in the program is expected to be announced earliest at the bank's next meeting on Dec. 16.

The ECB said it plans to continue net asset purchases under the PEPP until at least the end of March 2022, or until it judges that the coronavirus crisis phase is over.

Favorable financing conditions can be maintained with "a moderately lower pace" of net asset purchases, compared to the second and third quarters of this year, according to the statement.

The bank noted that it expects monthly net asset purchases "to run as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates."