ECB Holds Interest Rates Steady and Lowers Inflation Outlook
In line with market expectations, the European Central Bank (ECB) has decided to keep its key interest rates unchanged. The main refinancing rate is held at 4.50%, the rate for the marginal lending facility remains at 4.75%, and the rate for the deposit facility stands at 4.00%. This announcement reflects the ECB's continued policy to combat inflation without further adjustments to interest rates at this time.
Impact on Inflation
The ECB expressed a view that the prevailing inflation levels, if sustained over a sufficient period, would significantly aid in reducing inflation to the bank's target rate. The central bank's approach remains one where future policy decisions will hinge on incoming economic data, ensuring flexibility in response to changing economic conditions.
Revised Economic Projections
In the most recent economic forecasts, both headline and core inflation predictions have been lowered, due largely to a reduced impact from energy prices. The ECB projects that inflation will average 2.3% in 2024 before reaching the target of around 2.0% in 2025, and stabilizing at 1.9% in 2026. Core inflation, which excludes volatile energy and food prices, is anticipated to average 2.6% in 2024, decrease to 2.1% in 2025, and then even out at 2.0% in 2026.
Economic Growth Outlook
The projection for economic growth in 2025 has been adjusted downward to 0.6%, reflecting expectations of a continued period of subdued economic activity. However, the ECB predicts that the economy will eventually rebound, with growth projected to rise to 2.5% in 2025 and subsequently settle at 1.6% in 2026.
ECB, Inflation, Rates