A divided ECB is today debating whether to raise interest rates again or maintain them


Markets and analysts are also divided in their predictions about the decision. The ECB interest rate now stands at 4.25%.

The European Central Bank (ECB) will discuss this Thursday whether to raise interest rates again because inflation is still very high, or whether to maintain them because the economy is stagnating. The decision comes very close at this meeting because the ECB Governing Council is divided.

Markets and analysts are also divided predictions about the decision.

The ECB’s interest rates now stand at 4.25% and its deposit facility, through which it reimburses banks’ excess short-term reserves, at 3.75%.

The European Commission on Monday lowered its economic growth forecast for the eurozone this year by three-tenths to 0.8%, mainly as a result of the slowdown in activity in Germanywhich will shrink by 0.4% this year, predicting a slowdown of several months.

The hawks of the Governing Council of the ECB, the members most in favor of restrictive policies to combat inflation, have shown that the entity could increase the price of money today because prices are still rising sharply.

General inflation in the eurozone remained at the same level 5.3%like in July.

Core inflation, the inflation that does not take into account energy and food and energy because they are more volatile, moderated to 5.3% (5.5% in July).

The ECB will also publish its report today new macroeconomic forecastsin which economic growth expectations could be adjusted downwards and inflation expectations upwards compared to June.

The ECB’s new projections predict inflation of more than 3% in 2024, which, according to Reuters, is an argument for raising interest rates again.

In June, the entity forecast euro area growth of 0.9% this year with headline inflation of 5.4%.

Similarly, it predicts growth in 2024 of 1.5% at 3% inflation, and 1.6% in 2025 at 2.2% inflation.

Source: EITB


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