The ECB decided on interest rates. The euro reacts

(ECB), or rather the Governing Council (the equivalent of the Polish Monetary Policy Council), decided to maintain the current level. This means that the interest rate on main refinancing operations and the lending and deposit rates at the central bank will remain unchanged, at 4.50% and 4.75%, respectively. and 4 percent

The European Central Bank has made a decision. Interest rates unchanged

Thursday’s statement indicated that previous rate increases continue to have a strong impact on the economy. “Tightening financing conditions has a dampening effect on demand, which contributes to a decline in inflation” – .

According to Eurosystem experts’ expectations, economic growth will remain subdued in the short term. Later, the economy is expected to recover as real incomes increase, i.e. the beneficial impact of decreasing inflation and rising wages, as well as improvement in external demand. According to Eurosystem experts, economic growth will therefore amount to an average of 0.6%. in 2023, 0.8 percent in 2024 and 1.5 percent in 2025 and 2026.

The Governing Council remains committed to ensuring that inflation returns quickly to its medium-term target of 2%. Based on its current assessment, the Governing Council considers that the ECB’s key interest rates are at levels that, if maintained for a sufficient period of time, will make a significant contribution to achieving the stated objective. In future decisions, the Governing Council will ensure that the ECB’s key interest rates remain at sufficiently restrictive levels for as long as necessary.

– emphasized.

The euro reacted with growth to the ECB’s decision. EUR/PLN exchange rate at At 14:40 it jumped to PLN 4.31 (an increase of 0.27% from the previous close). Despite this, the euro remains the cheapest since the beginning of 2020. The EUR/USD rate is USD 1.093 (an increase of 0.45%).

Euro exchange rate Chart: Stooq.pl

Inflation in the euro zone. Expert forecasts

The European Central Bank noted the decline in recent months, but added that it “is likely to increase again temporarily in the short term.” According to the latest Eurosystem staff projections for the euro area, inflation is expected to decline gradually next year, reaching the target level of 2% adopted by the Governing Council. will approach in 2025.

Taken together, experts expect total inflation to average 5.4%. in 2023, 2.7 percent in 2024, 2.1 percent in 2025 and 1.9 percent in 2026. Compared to the experts’ projections in September, this means a downward revision for 2023 and especially for 2024.

It was also emphasized that internal price pressure is still elevated, which results primarily from the strong dynamics of unit labor costs. Eurosystem experts expect inflation excluding energy and food prices to average 5%. in 2023, 2.7 percent in 2024, 2.3 percent in 2025 and 2.1 percent in 2026.