ECB leaves interest rates unchanged today as widely expected. That is, The main refinancing rate, marginal lending facility rate and deposit rate are held at 0.00%, 0.25% and -0.50% respectively. However, it explicitly said, “the Governing Council intends to raise the key ECB interest rates by 25 basis points at its July monetary policy meeting.”
Besides, ECB said is expects to “raise the key ECB interest rates again in September”. The size would depend on the updated medium-term inflation outlook by then. “If the medium-term inflation outlook persists or deteriorates, a larger increment will be appropriate at the September meeting,” it added. Beyond September, “a gradual but sustained path of further increases in interest rates will be appropriate.”
Also as expected, ECB decided to end net asset purchases as of July 1, 2022. It will “continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates and, in any case, for as long as necessary to maintain ample liquidity conditions and an appropriate monetary policy stance.”
In the new economic projections, annual inflation will hit 6.8% in 2022, then decline to 3.l5% in 2023 and then 2.1% in 2024. Excluding energy and food, inflation is projected to it 3.3% in 3022, then slow to 2.8% in 2023 and then 2.3% in 2024. Inflation projections were revised up “significantly” due to surging energy and food prices, including due to the impact of war”.
GDP growth is projected at 2.8% in 2022, 2.1% in 2023 and 2.1% in 2024 (revised down slightly for 2022 and 2023, but up for 2024).
