FRANKFURT, Germany, Sept. 11 (Xinhua) -- The European Central Bank (ECB) on Thursday kept its key interest rates unchanged from June, while confirming that it continues to be "in a good place."

Despite the ECB's rhetoric of standing ready to act to ensure that inflation stabilizes at its medium-term target, there are signs that its easing cycle is nearing the end.

"DISINFLATIONARY PROCESS IS OVER"

The ECB left key interest rates unchanged since its last rate cut in June. The interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will remain unchanged at 2 percent, 2.15 percent and 2.4 percent respectively.

Looking back on the process of fighting price hikes, ECB President Christine Lagarde reiterated that the central bank had rightly used interest rates as its main policy tool.

In a little over a year, the ECB hiked key interest rates by a total of 450 basis points in its most aggressive rate hike cycle, as inflation repeatedly reached record highs. The rate on the deposit facility, the ECB's key tool for conducting monetary policy, was raised from -0.5 percent to 4 percent between July 2022 and September 2023.

In an attempt to wind down the tightening measures, the ECB has embarked on an easing cycle since June 2024. The key interest rates had been cut by a total of 200 basis points by June this year.

"The disinflationary process is over," announced Lagarde at the press conference on Thursday.

ECB IN "GOOD PLACE"

Lagarde confirmed that the central bank continues to be "in a good place" where inflation has been brought down and remains on target and the euro-area economy has fared well so far this year.

Inflation in the euro area edged up slightly to 2.1 percent in August from 2 percent in July. "Inflation is where we want it to be," noted Lagarde.

Aside from the current inflation readings, longer-term inflation expectations also continued to be around 2 percent, according to the ECB.

The latest ECB staff projections revised the euro-area inflation expectations for 2025 and 2026 by 0.1 percentage point compared with June. Headline inflation is forecast to average 2.1 percent in 2025, 1.7 percent in 2026 and 1.9 percent in 2027.

Lagarde dismissed the concerns about undershooting inflation, given that the inflation expectations for both 2026 and 2027 fall below its target level of 2 percent.

Minimal deviations, according to Lagarde, will not justify any particular movement as long as they remain minimal and not long-lasting.

The euro area economy grew by 0.7 percent in cumulative terms in the first half of this year, a sign of resilience in times of heightened uncertainties.

Lagarde stressed that the strong growth in the first quarter was not only attributed to the front loading effects but also investment and consumption.

ECB staff have revised up their forecast for the euro area economy to 1.2 percent in 2025 from 0.9 percent in projections made in June.

DOOR NOT CLOSED

Lagarde fell short of confirming that the easing cycle is over and insisted that the ECB is not pre-committing to a particular rate path, leaving the door open in principle to another rate cut.

"We will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission," said an ECB statement.

Lagarde said that the data-dependent and meeting approach was aimed at ensuring that the ECB continues to be in a good place.

As a matter of fact, the central bank is in an even better place than in June as uncertainties over U.S. tariff policies have diminished and a "worst-case scenario" has been avoided.

The United States and the EU have reached an agreement that a 15 percent tariff would be imposed on most European exports to the United States.

In the June projections, the ECB factored in the risk of trade war as a result of European retaliation to the U.S. trade policies.

Carsten Brzeski, Global Head of Macro at ING Bank, sees the ECB's decision to leave interest rates unchanged as a "greater conviction" that the ECB feels comfortable about the current levels of rates.

The possibility that the ECB may be forced to abandon its "good place" can not be ruled out even if the threshold for another rate cut has been set high, according to Brzeski.