The European Central Bank raises the main interest rate in the eurozone again.
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The European Central Bank raises its main interest rate by 0.25 percentage point to 3.5 percent.
In advance, the European Central Bank was expected to raise interest rates by 0.25 percentage points.
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The European Central Bank has raised interest rates several times in an effort to calm the economy and beat high inflation.
In May, inflation eased to 6.1 percent, down from 7.0 percent in April. Core inflation, meanwhile, fell to 5.3 percent last month, down from 5.6 percent in April.
Inflation is still very high
The central bank writes in press release That inflation is on the way down, but it’s still very high.
The European Central Bank writes that it is determined to bring inflation down to the 2% target.
At the same time, the central bank confirms that previous interest rate hikes are beginning to affect the economy in the eurozone. Borrowing costs have increased sharply, while lending growth is slowing.
Tightening financing conditions is a key reason for estimating that inflation will fall further towards the 2 percent target, says the ECB.
Increased economic activity in the Eurozone: The Purchasing Managers’ Index (PMI) reached 53.3 in May
Today’s rate hike reflects the ECB’s updated assessment of inflation expectations, the dynamics of core inflation, and the strength of monetary policy assessments, the central bank wrote.
The council expects inflation to average 5.4 percent in 2023, 3.0 percent in 2024, and 2.2 percent in 2025.
Core inflation indicators indicate that price pressure remains strong, although it is showing signs of abating, the central bank wrote in a press release.
At the same time, the European Central Bank raises its core inflation forecast. The European Central Bank estimates that the core inflation rate will be 5.1 percent in 2023, before falling to 3.0 percent in 2024 and falling to 2.3 percent in 2025.
Future interest rate decisions will depend on inflation expectations in light of new economic data, the ECB writes.
– The ECB’s future interest rate decisions will ensure that the policy rate remains at a level constrained enough to bring inflation down to the target of 2.0 percent, the ECB wrote.
– We’re not thinking of a break
In a press conference following the interest rate decision, Christine Lagarde reiterated the message that inflation remains too high, and that the central bank will do what is necessary to bring inflation down to 2%.
– We stand ready with whatever assistance we can provide within our mandate to help bring inflation down to 2%, says Lagarde.
The central bank governor also stated that the outlook for both inflation and economic growth is uncertain. Economic growth is likely to be weak in the short term, but it will pick up strength during the year as inflation falls.
Lagarde also says that interest rates will remain at a sufficiently restrictive level for as long as necessary.
– We will likely continue to raise interest rates in July, which probably won’t surprise you, says Lagarde.
– We’re not thinking of a break, you continue.
You will take the necessary action
The previous rate hike came from the European Central Bank at the beginning of May, when the main interest rate was raised by 0.25 percent to 3.25 percent.
After the previous interest rate meeting, the central bank stated that the interest rate would be at levels constrained enough to achieve the target of a 2 percent rate increase.
– Decisions will be made based on how price growth looks like in the future, writes the ESB.
Central Bank Governor Christine Lagarde stated at the same time that the European Central Bank is determined to take the necessary measures to combat inflation, and will take the necessary measures.
On Wednesday, the US central bank, the Federal Reserve, kept interest rates unchanged in the range of 5-5.25 percent. At the same time, two more rate hikes were announced in 2023, to a peak of 5.6 percent, compared to the 5.1 previously forecast.
Next Thursday, Norges Bank will make its next interest rate decision. According to the regional network, many brokers expect Norges Bank to raise interest rates by 0.5 percentage points next week.
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