It insists on its anti-inflationary policy European Central Bankwhich proceeded on Thursday, to a new interest rate increase of 25 basis pointsas its president had announced Christine Lagarde. This is the 8th consecutive rate increase.

That’s how it is deposit rate is formed now in 3.5% while the corresponding for the main refinancing operations at 4%.

Inflation has decreased, but it is predicted to remain at a very high level for a very long time, the Eurobank emphasizes. The Board is determined to ensure that inflation returns in time to medium-term target of 2%, and will be maintained at these levels for as long as necessary.

After today’s decision interest rates return to level which was in 2001. The ECB slowed the pace of its rate hike to 25 basis points at its meeting in May after consecutive increases of 75 and 50 basis points. However, since last year in July, when the cycle of increases opened interest rates have risen by a total of 4%dragging up the cost of servicing the loans.

Defying expectations

The new interest rate hike partly reflects the ECB’s defying expectations to reduce inflation faster, as reflected in the revised forecasts it announced today.

According to the new forecasts inflation is expected to close this year at 5.1% versus 5.3% which was the March forecast, however in 2024 and 2025 the new forecast is more unfavorable. Specifically the 2024 inflation is estimated to fall to 3% from 2.9% which was the previous forecast, while for 2025 it is predicted to be 2.3% from 2.1% predicted in March.

On hand, the forecasts for the course of the economy were also revised, predicting that GDP will grow this year by 0.9% (versus 1% which was the March forecast) by 1.5% in 2024 (from 1.6% which was the previous forecast), while the forecast for GDP growth in 2025 remained unchanged at 1.6%.

The ECB finds that borrowing costs have skyrocketedafter the last increases, and the pace of new lending is slowing. Tighter financing conditions are a key reason why inflation is forecast to fall further towards target, as they are expected to further constrain demand.

The Governing Council will continue to make interest rate decisions in line with its assessment of the outlook for inflation in light of new financial data, inflation dynamics and the strength of monetary policy transmission.

However, the increase in interest rates does not affect the cost of servicing mortgage loans, after the decision of the Greek banks to impose “moratorium” by freezing interest rates.

It is noted that the Federal Central Bank of the USA (Fed) on Wednesday left interest rates unchanged after 10 consecutive increases.