The ECB maintains the brake on interest rates at 4.5% at its last meeting in 2023

There was an interest for the Governing Council of the European Central Bank (ECB) in not touching anything. The European banking regulator followed the same approach it adopted last October and, with interest rate at 4.5%has chosen to maintain the brake until at least 2024.

The monetary policy of the institution he heads Christine Lagarde has taken a slight turn in recent months after ten consecutive increases in the price of silver in an attempt to control inflation.

“The Governing Council today decided to keep the ECB’s three official interest rates unchanged. Although inflation has fallen in recent months, it is likely to temporarily pick up in the short term,” he said. he detailed in his note.

And everything seems linked to the evolution of inflation in the euro zone. After start 2023 at 8.6%the latest data, dating from last November, comes from 2.4%.

With the moderation of prices, the ECB seems to be betting on the same measures as the Federal Reserve and is also trying to calm the expectation of imminent declines after the historic increases that have taken place since July 2022.

Inflation will decline “gradually” in 2024

The body chaired by Lagarde detailed some of the projections left by the Eurosystem’s technical services for the euro zone. “Inflation is expected to gradually decline over the next year, before approaching the 2% target set by the Governing Council in 2025,” said the statement released Thursday.

“In general, technical staff expect general inflation on average to be 5.4% in 2023, 2.7% in 2024, 2.1% in 2025 and 1.9% in 2026,” he said. -he advanced to the regulator of European banks.

The ECB clarified that, comparing with the experts’ projections from September, “this amounts to a downward revision for 2023 and, above all, for 2024”.

“Underlying inflation has fallen further. But domestic price pressures remain high, mainly due to strong growth in unit labor costs,” they revealed. Core inflation will average 5.0% in 2023, compared to 2.7% in 2024, 2.3% in 2025 and 2.1% in 2026.

During the press conference that followed, Christine Lagarde clarified that the interest rate levels applied so far “will contribute” to controlling inflation and explained that “future decisions” will continue to be ” sufficiently restrictive for as long as necessary.

“We will apply a data-driven approach. Our interest rate decisions will be based on the economic outlook,” he said.

Moderate economic growth in the short term

After historic increases in interest rates, the ECB also recognizes that the restrictive policy it has applied since July 2022 has had “a strong impact on the economy”. “Tighter financing conditions slow demand and help reduce inflation,” they added.

“Eurosystem staff expects economic growth to remain moderate in the short term. Beyond this, the economy is expected to recover thanks to rising real incomes and improving external demand “, they said.

The economy is expected to recover thanks to rising real incomes and improving external demand.

The institution chaired by Lagarde estimates that growth will increase from an average of 0.6% for 2023 to 0.8% for 2024 and 1.5% for 2025 and 2026.

“As the energy crisis fades, governments should continue to withdraw related support measures. This is essential to avoid an increase in inflationary pressures in the medium term,” said the ECB leader.

1.5% more interest in 2023

After several meetings during which fears of a further rise in the price of silver were finally realized, the regulator of European banks chose to follow the path of maintaining rates and thus avoid continuing its restrictive policy which increased interest rates. 150 basis points in 2023.

Today, experts are talking about the same thing: when will the first rate cuts take place, if the evolution of inflation continues as it is today. Some analysts point out Europe Press that despite good progress in the disinflationary process, reductions would not be a reality until mid-2024.

But it is already good news that we are beginning to explore the possibility that the ECB will begin to loosen a knot that has tightened to levels never seen before after the economic crisis stemming from the war in Ukraine.

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