As anticipated, the ECB increased interest rates by 50 basis points on Thursday in an effort to slow the persistently high inflation in the area. This brought borrowing costs to their highest level since late 2008. The banking sector in the euro area is resilient, with strong capital and liquidity positions, according to policymakers, who also stated that they were carefully observing the current market tensions and were prepared to act as needed to protect the region’s financial stability and price stability. To 3.50%, 3.75%, and 3.00%, respectively, the interest rates on the principal refinancing procedures, the marginal lending facility, and the deposit facility were all raised. Inflation will likely average 5.3% in 2023, 2.9% in 2024, and 2.1% in 2025, according to the ECB staff. Core inflation is now anticipated to average 4.6% in 2023, higher than in the December projections, and underlying price pressures are likely to stay strong.
Source: Trading Economics
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