European Central Bank raises rates by 25 basis points

0


The European Central Bank on Thursday lifted its key interest rates by 25 basis points, acknowledging a decline in inflation but warning that price pressures remain.

“Inflation continues to decline but is still expected to remain too high for too long. The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner,” the ECB said in a statement.

Market participants had been torn over prospects for a rate hike heading into the meeting. Expectations moved more decisively in favor of a further monetary tightening after JP reported Wednesday that the ECB staff would raise their inflation forecast for this year and next while lowering the growth forecast.

The report proved correct, with ECB estimating euro area inflation at 5.6% in 2023, 3.2% in 2024 and 2.1% in 2025 — 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, the ECB said. The staff significantly downgraded its forecasts for eurozone growth, looking for the economy to expand 0.7% in 2023, 1% in 2024 and 1.5% in 2025.

Thursday’s decision marked the 10th straight rate hike by the ECB, which is led by President Christine Lagarde. She will hold a news conference at 2:45 p.m. Frankfurt time, or 8:45 a.m. ET.

The ECB’s internal debate over Thursday’s decision was expected to be fierce, “as lingering core inflationary pressure is being counterbalanced by evidence of rapidly worsening economic conditions in the euro area,” wrote economists at ING.

The HCOB eurozone composite PMI fell to a 33-month low of 46.7 in August, on a scale where readings below 50 indicate deteriorating conditions. Eurozone GDP was revised lower for the second quarter to show a scant 0.1% quarter-on-quarter growth. 

—Steve Goldstein contributed.

Source
Las Vegas News Magazine

Leave A Reply

Your email address will not be published.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More