FRANCOFORTE (GERMANY) (ITALPRESS) – The Governing Council of the European Central Bank has decided to raise the three reference interest rates by 25 basis points. “The conflict in the Middle East continues to generate pressure on inflation, which should keep on levels above the target for a prolonged period. Today’s decision underlines the commitment of the Governing Council to define monetary policy in order to ensure that inflation is based on the objective of 2% in the medium term,” explains the ECB in a note.
Interest rates on deposits at the central bank, major refinancing operations and marginal refinancing operations will be raised at 2.50%, 2.65% and 2.90% respectively, with effect from 16 September 2026. In the basic scenario of the new ECB expert projections, overall inflation would average 3% in 2026, 2.5% in 2027 and 2.1% in 2028. Inflation net of the energy and food component would lead to 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. Compared to last June, inflation projections remained unchanged for 2026, but were revised up for 2027 and 2028. In the basic scenario of the projections economic growth should be 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. The upward correction for 2026 and 2027 mainly reflects a capacity for holding the euro area’s economy greater than expected.
“The perspectives remain very uncertain, with risk oriented to rise for inflation and downwards for economic growth – the European Central Bank emphasizes –. With regard to energy shock, the new scenarios formulated by our experts illustrate the wide range of outcomes for the evolution of growth and inflation based on different hypotheses on the intensity and duration of shock, as well as indirect and second impact effects.”.
With today’s decision the Governing Council remains “in a favourable position to address the uncertainty caused by the conflict – the note continues –. In order to define the appropriate monetary policy orientation, a data-driven approach will follow, according to which decisions are taken from time to time at each meeting. In particular, the decisions of the Governing Council on interest rates will be based on the assessment of the prospects for inflation and the risks associated with them, considered the new economic and financial data, as well as the dynamics of underlying inflation and the intensity of the transmission of monetary policy, without binding on a particular path of rates.”.
The portfolios of the PAA and the PEPP (pandemic emergency purchase programme) are reducing at a measured and predictable rate, as the Eurosystem no longer reinvests the capital repaid on the securities expiry.
The Governing Council “is ready to adapt all its instruments within its mandate to ensure that inflation is established on the medium-term objective of 2% and to preserve the smooth functioning of the monetary policy transmission mechanism – concludes the note. Moreover, the instrument of protection of the monetary policy transmission mechanism can be used to counter unjustified, disorderly market dynamics that seriously jeopardize the transmission of monetary policy in all the countries of the euro area, thus enabling the Governing Council to fulfil its mandate of price stability more effectively.”.
– Photo IPA Agency –
(ITALPRESS).
