FRANKFURT (Reuters) – The European Central Bank has upgraded its annual inflation forecast, expecting price growth to remain above its 2% target until the end of 2025.

The ECB raised its projections for inflation excluding energy and food prices for 2023 and 2024, citing in particular the impact of a solid labor market.

After hitting a double-digit rate last year, the consumer price index in the euro zone has since almost halved, thanks to the decline in energy prices. Nevertheless, inflation is still too high, particularly in food and services.

When it comes to rate hikes, some members of the ECB argued that it was better for the institution to do too much than not enough, as a pause would mean maintaining a restrictive policy for longer.

The bank thus decided to further tighten its policy on Thursday, bringing its deposit rate to 3.5%, its highest level in 22 years.

Along with that, it lowered its growth forecast for 2023 after the eurozone economy slipped into recession in the first quarter.

(Balazs Koranyi, Laetitia Volga, edited by Kate Entringer)

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