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The European Central Bank on Thursday lifted interest rates in the eurozone by 25 basis points as inflation in the euro area is expected to remain ‘too high for too long.’
Thursday’s decision by the ECB Governing Council took the interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility to 4.50%, 4.75% and 4.00%, respectively.
It means the Frankfurt-based central bank has hiked its policy rates by a cumulative 450 basis points during the current tightening cycle. At its last meeting in July, the ECB had lifted rates by 25 basis points.
‘The rate increase today reflects the Governing Council’s assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission,’ the ECB said in its policy statement.
It added that, based on its current assessment, it believes interest rates have reached levels that, when maintained for a ‘sufficiently long duration’, will make a ‘substantial contribution to the timely return of inflation to the target.’
Looking forward, the central bank said it would continue to follow a data-dependent approach, with particular attention to the inflation outlook, the dynamic of underlying inflation, and the strength of monetary policy transmission.
The September ECB staff macroeconomic projections for the euro area now see average inflation at 5.6% in 2023, 3.2% in 2024 and 2.1% in 2025.
This represents an upward revision for 2023 and 2024 and a downward revision for 2025 which had predicated average inflation at 5.4%, 3.0%, and 2.2%, respectively.
A press conference with ECB President Christine Lagarde will begin at 1345 BST.
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