Interest rates in the eurozone continue to deteriorate. European Central Bank (ECB) President Christine Lagarde said interest rates would still rise “significantly” to stem price increases, in statements at a press conference that followed the Board of Governors.
“We expect to rise [as taxas de juro] significantly higher as inflation remains too high and is expected to remain above our target [de 2%] too long,” Christine Lagarde said.
The prospect of further growth is expressed together with solution raise eurozone interest rates by another 50 basis points. The interest rate applicable to the main refinancing operations is increased to 2.5%, while the interest rate applicable to the margin credit line is increased to 2.75% and the rate applicable to the standing deposit is increased to 2% from 21 December 2022.
After a ten-year all-time low, interest rates first rose in July (by 50 points), and then again in September, November (by 75 points each), and now in December. In total, three rates set by the ECB have increased by 250 basis points in 2022. And the path will continue.
“The key message is that we are not only going to raise interest rates even more, but we must raise them significantly,” Lagarde said. The ECB president also clarified that these changes will be made at a “steady pace”, making it clear that 50 basis points each would be the appropriate level.
“The steady pace means that we have made some progress over the past few months, but we still have a lot to do. We are here for the long term,” he said. The reason for the desire to remain on the same course is associated with a more negative outlook for the eurozone economy.
Given the “context of exceptional uncertainty”, ECB staff made the situation “significantly” worse. inflation and economic growth forecastswaiting for what average inflation reaches 8.4% in 2022 and then declines to 6.3% in 2023. 3.4% is expected next year, with a further decline to 2.3% in 2025.In the case of GDP, the ECB expects that the economy is growing at 3.4% this year, 0.5% next year and accelerating again to 1.9% in 2024 and 1.8% in 2025. “According to the latest forecasts of the “employees” of the Eurosystem, the recession will be relatively short-term and superficial,” Lagarde said.
(News updated at 15:00)
