The European Central Bank (ECB) on Thursday decided to leave key interest rates unchanged, as underlying inflation dropped in December last year.

The three key interest rates will therefore remain at historically high levels. The ECB said that 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 4.5 percent, 4.75 percent and 4 percent respectively.

"Aside from an energy-related upward base effect on headline inflation, the declining trend in underlying inflation has continued, and the past interest rate increases keep being transmitted forcefully into financing conditions."

The ECB confirmed that almost all measures of underlying inflation declined in December. The rate of wage increases in the euro area, which the central bank's president Christine Lagarde was concerned about at the ECB's last rate-setting meeting, has started to ease.

The ECB reaffirmed its determination to bring inflation back to two percent in a timely manner, and stressed that "our policy rates will be set at sufficiently restrictive levels for as long as necessary."

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