ECB ups 3 interest rates, sees euro area economy to grow 0.7% in 2023

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The European Central Bank (ECB) recently raised its three key interest rates by 25 basis points to ensure that inflation in the euro area timely returns to its 2 per cent medium-term target. Inflation continues to decline, but is still expected to remain too high for too long, ECB noted.

The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility were increased to 4.50 per cent, 4.75 per cent and 4.00 per cent respectively, with effect from September 20, 2023.

The September ECB macroeconomic projections for the euro area see average inflation at 5.6 per cent in 2023, 3.2 per cent in 2024 and 2.1 per cent in 2025. This was an upward revision for 2023 and 2024 and a downward revision for 2025.

The European Central Bank (ECB) has raised three key interest rates by 25 basis points to ensure that euro area inflation returns to its 2 per cent medium-term target.
Inflation continues to fall, but is still likely to be too high for too long, ECB noted.
It expects the zone’s economy to expand by 0.7 per cent in 2023, 1 per cent in 2024 and 1.5 per cent in 2025.

The upward revision for 2023 and 2024 mainly reflects a higher path for energy prices. Underlying price pressures remain high, even though most indicators have started to ease.

ECB expects the euro area economy to expand by 0.7 per cent in 2023, 1 per cent in 2024 and 1.5 per cent in 2025.

The economy is likely to remain subdued in the coming months. It broadly stagnated over the first half of the year, and recent indicators suggest it has also been weak in the third quarter.

Lower demand for the euro area’s exports and the impact of tight financing conditions are dampening growth, including through lower residential and business investment, ECB said in a release.

The labour market has so far remained resilient despite the slowing economy. The unemployment rate stayed at its historical low of 6.4 per cent in July. While employment grew by 0.2 per cent in the second quarter, momentum is slowing.

The short-term outlook for growth in the euro area has deteriorated, while over the medium term the economy should gradually return to moderate growth as both domestic and foreign demand recover.

Fibre2Fashion News Desk (DS)


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