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.
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.
