The ECB also raised its forecasts for inflation, which it now expects to come down more slowly toward its 2% target over the next two years, while cutting its expectations for economic growth
The European Central Bank raised its key interest rate to a record peak on Thursday and signalled this will likely be its final move in a more-than year-long fight against stubbornly high inflation.
The upgrade to the 2024 estimate – which had been reported by Reuters earlier – was likely to have played a significant role in discussions as policy-makers weighed the risk inflation, currently still above 5 per cent, would get stuck at a high level. Just 14 months ago, that rate was languishing at a record low of minus 0.5 per cent, meaning banks had to pay to park their cash securely at the central bank.
In contrast, markets have fully priced in unchanged rates at next week’s meeting of the U.S. Federal Reserve, which started raising earlier and has moved higher than the ECB.Supporters of a hike this week are likely to have argued it was needed because inflation, including underlying measures that strip out volatile components, remained too high, with a recent surge in energy prices threatening a new acceleration.
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