ECB raises the three key interest rates by 50bps today. After that, the main refinancing, marginal lending facility and deposit facility rates will be 3.50%, 3.75%, and 3.00% respectively.
There was no reference to further tightening in upcoming meetings. Instead the governing council will continue with a “data-dependent approach”, with decisions determined by inflation outlook, dynamics of underlying inflation, and strength of monetary policy transmission.
In the new economic projections, headline inflation forecast was revised down across the horizon. But core inflation forecast was revised up in 2023. GDP growth forecast is also revised up in 2023.
- Headline inflation is forecast to average 5.3% in 2023, 2.9% in 2024, and 2.1% in 2025. The estimate was downgraded from December’s 6.3% in 2023, 3.4% in 2024, and 2.3% in 2025.
- Core inflation is projected to average 4.6% in 2023, 2.5% in 2025, and 2.2% in 2025. Comparing to December projections of 4.2% in 2023, 2.8% in 2024, and 2.4% in 2025.
- GDP growth is forecast to average at 1.0% in 2023, 1.6% in 2024, and 1.6% in 2025, comparing to December’s forecast of 0.5% in 2023, 1.9% in 2024, and 1.8% in 2025.
But the central noted that the macroeconomic projections were finalized before recent emergence of financial market tensions. Hence, there is additional uncertainty around the above baseline assessments.
