The European Central Bank again froze borrowing costs but warned that inflation could rise again in the near future, apparently defying market hopes for an early rate cut in 2024.
The second consecutive pause kept the ECB's deposit rate at a record high of 4% after a historic run of hikes aimed at taming rapidly rising prices.
The institution said rates were at levels that, if "sustained for long enough", would make a "substantial contribution" to returning inflation to the 2% target.
Eurozone inflation slowed faster than expected in November to a two-year low of 2.4%, after peaking at around 10% last year.
But the ECB warned against declaring victory too soon.
"Although inflation has fallen in recent months, it is likely to rise again temporarily in the near future," the report said amid concerns about wage increases in the euro area.
The ECB's warning is likely to be aimed at cooling investor expectations for faster interest rate cuts in 2024.
Speculation intensified after the U.S. Federal Reserve kept interest rates on hold and indicated it expects three rate cuts next year.
The ECB reiterated that its next steps would be "data dependent" while presenting its latest economic forecasts.
The bank said eurozone inflation is now expected to slow to 2.7% in 2024, rather than the 3.2% previously forecast.
In 2025, it will fall further to 2.1% before falling below 2% in 2026.
Growth is expected to reach 0.6% this year, down from the previous forecast of 0.7%, the bank said. For 2024, the forecast is 0.8%, down from 1.0%.
While many analysts initially expected the ECB to start cutting rates in June, the recent drop in inflation has led some to forecast a first cut as early as March or April. /BGNES
