In its policy of monetary adjustment to combat inflation, the European Central Bank (ECB) raised the interest rates at 0.25 points percentages, configuring the eighth increment consecutive.
According to the latest estimates from the agency in charge of christine lagardeIt is expected that inflation reaches 5.4% in 2023compared to the previous forecast of 5.3% in March. The projections indicate that the rise in prices will fall to 3.0% in 2024 and 2.2% in 2025approaching the objective of 2% established by the institution.
The French economist advanced that: “Unless there are substantial changes, rates will continue to rise in july”, thus advancing on the ECB decision for next month’s meeting.
European GDP
As for the Gross domestic product (GDP), a growth of 0.9% this yearcompared to the previous projection of 1.0%. For 2024 and 2025growth of 1.5% and 1.6%, respectively, is forecast.
“Inflation is showing signs of slowing down, but is expected to remain too high for a prolonged period“, said the ECB in a statement that accompanied the increase in rates.
The benchmark deposit rate now stands at 3.50%its highest level since May 2001. The refinancing rate stands at 4.0% and the marginal credit facility rate at 4.25%.
After a decade of loose monetary policy, the ECB began a tightening cycle without precedents to offset the increase in consumer prices due to the situation in Ukraine and the Russian offensive.
With the increase in rates, central banks reduce the demand for credit, which impacts the investment and consumption of households and companiesresulting in a decrease in demand and pressure on prices.
Source: Ambito
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