The European Central Bank (ECB) raised interest rates by 25 basis points once again during its June meeting.
- The main refinancing operations (MRO) rate was adjusted to 4.00%, reaching its highest level since the 2008 financial crisis.
- The deposit facility (DF) rate was increased to 3.50%, the highest level in 22 years.
- The marginal lending facility (MLF) rate was raised to 4.25%.
This marks the eighth consecutive interest rate hike, despite the Eurozone having experienced a recession at the beginning of 2023 and overall inflation rates and core inflation rates remaining significantly above the ECB’s 2% target. The ECB also revised its inflation forecast upward and slightly lowered its economic growth projections for this year and next.
- The Eurozone’s economic growth forecast for this year was lowered to 0.9% (compared to the March estimate of 1%), and the forecast for next year was revised down to 1.5% (compared to 1.6%).
- The inflation rate forecast for the Eurozone was raised (an increase of 0.1% compared to March), with expectations of reaching 5.4% this year and then decreasing to 3.0% and 2.2% in the following years.
Meanwhile, during the press conference, ECB President Christine Lagarde stated that there is more work to be done by the European Central Bank and that they may continue raising interest rates in July. ECB officials have implemented an unprecedented 400 basis points of rate hikes over the past year, making it the fastest period of interest rate increases in the bank’s history.
