The European Central Bank announces rate hikes and lower than expected inflation

SBV, Swiss credit, consequences of the war in Ukraine… The banking sector in the euro zone has a lot to do. But the European Central Bank, imperturbable, remained entrenched in its positions. Whether american turbulence and Swiss had been able to encourage him to loosen his turn of the screw, the ECB decided in favor of the fight against inflation, by announcing a new increase in its main key rates of 0.50 percentage point, this Thursday.

ECB interest rates are now in a range between 3% and 3.75%, continuing its plan to tighten monetary policy further to fight inflation. “The banking sector in the euro zone is resilient and has solid capital and liquidity positions”, ures the ECB. The Frankfurt-based establishment nevertheless waives its commitment to further “significantly” raise its rates in the coming monthswhile the specter of a new banking crisis encourages it to be more cautious.

The President of the European Central Bank ured Thursday that the institution would be ready to react if necessary to “preserve financial stability” in the euro area. “We are closely monitoring the current tensions in the markets”, hammered the central banker, uring that the banking sector “is currently in a much stronger position than in 2008”, during the financial crisis which had destabilized the economy world.

5.3% inflation in 2023, against 6.3% forecast

The next decisions on key rates will be determined in particular on the basis of the “essment of the outlook for inflation”, in particular inflation excluding energy pricesaccording to a press release from the institution published after the meeting of its board of governors.

For the 2023 figures, the euro zone should experience lower inflation and stronger growth than expected, against the backdrop of a lull in energy prices and “more resilient economy” in the face of “the environment difficult international situation”, according to the new forecasts of the ECB unveiled. Inflation is expected to reach 5.3% in 2023against 6.3% forecast at the end of December, then 2.9% in 2024 and 2.1% in 2025. The euro zone is expected to experience GDP growth of 1.0% this year, against 0.5% previously forecast , before 1.6% in 2024 and 2025.

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