At today's meeting, the European Central Bank raised all three key interest rates by 50 basis points. The base interest rate on loans was increased to 3.5%, the rate on deposits – up to 3%, the rate on margin loans – up to 3.75%. In a statement, the ECB said that, most likely, inflation in the region remains quite high for a long time. Moreover, there is an increased level of uncertainty in the region, including geopolitical, which increases the importance of taking into account the political situation and incoming macroeconomic data. Thus, the central bank intends to make further decisions taking into account the assessment of inflation prospects in the light of incoming economic and financial data, as well as the dynamics of core inflation. In addition to the decision on the rate, the ECB released updated forecasts for the eurozone for 2023-2025. According to the new forecast, inflation in the eurozone in 2023 will be 5.3%, in 2024 –2.9%, in 2025 – 2.1%, which is already close to the 2% target of the regulator. Last December, the ECB expected inflation to be 6.3% this year, 3.4% next year and 2.3% in 2025. Core inflation (excluding food and energy costs) will hit 4.6% this year before slowing to 2.5% in 2024 and 2.2% in 2025. The Eurozone GDP growth forecast for 2023 was raised to 1% from 0.5%, for 2024 – lowered to 1.6% from 1.9%, for 2025 – to 1.6% from 1.8%.
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