The European Central Bank leaves its rates unchanged and lowers its growth forecast

The European Central Bank (ECB) announced on Thursday March 7 that it was leaving its rates unchanged for the fourth time in a row, opting for caution in the face of falling inflation in the euro zone.

The deposit rate, which is a benchmark in particular for the cost of credit to households and businesses, remains at 4%, its highest level since the launch of the single currency in 1999. The refinancing rate and the facility rate marginal loan are respectively at 4.50% and 4.75%. Furthermore, the ECB has revised downwards its annual inflation forecast in the zone, from 2.7% to 2.3% for 2024. It now expects it to achieve its objective of inflation at 2% in 2025.

Scrutinized by the financial markets and the ECB, so-called core inflation, that is to say without the – very volatile – prices of energy and food, slowed in February to 3.1%. , compared to 3.3% in January. The ECB attributes this drop in inflation to its unprecedented monetary tightening campaign planned from July 2022 to control the surge in prices caused by the war in Ukraine.

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By improving borrowing costs at an unprecedented pace, demand for credit has been dampened, affecting consumption and investment by businesses and households alike. The downside of this policy: the euro zone economy has been stagnating for almost a year and a half.

The World with AFP

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