ECB ups 3 interest rates by 25 bps; inflation to be too high for long

14 Sep '23

2 min read

Pic: Shutterstock

Insights

The governing council of the European Central Bank (ECB) today decided to raise the three key ECB interest rates by 25 basis points to ensure that soaring inflation returns to its 2 per cent medium-term target in a timely manner.
ECB now expects the euro area economy to expand by 0.7 per cent in 2023, 1 per cent in 2024 and 1.5 per cent in 2025.

As inflation in the euro area continues to decline but is still expected to remain too high for too long, the governing council of the European Central Bank (ECB) today decided to raise the three key ECB interest rates by 25 basis points to ensure that inflation returns to its 2 per cent medium-term target in a timely manner.

The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 4.50 per cent, 4.75 per cent and 4 per cent respectively, with effect from September 20.

The September ECB macroeconomic projections for the euro area see average inflation at 5.6 per cent in 2023, 3.2 per cent in 2024 and 2.1 per cent in 2025, ECB said in a press release. This is an upward revision for 2023 and 2024 and a downward revision for 2025.

The upward revision for 2023 and 2024 mainly reflects a higher path for energy prices. Underlying price pressures remain high, even though most indicators have started to ease.

ECB has slightly revised down the projected path for inflation excluding energy and food to an average of 5.1 per cent in 2023, 2.9 per cent in 2024 and 2.2 per cent in 2025.

Financing conditions have tightened further and are increasingly dampening demand, which is an important factor in bringing inflation back to target, ECB said.

With the increasing impact of this tightening on domestic demand and the weakening international trade environment, ECB has significantly lowered its economic growth projections, and now expects the euro area economy to expand by 0.7 per cent in 2023, 1 per cent in 2024 and 1.5 per cent in 2025.

Fibre2Fashion News Desk (DS)

More European Union News... More Textiles News - Belgium...