The European Central Bank (ECB) announced on Thursday March 7 that it was leaving its rates unchanged for the fourth time in a row, opting for caution in the face of falling inflation in the euro zone.
The deposit rate, which is a benchmark in particular for the cost of credit to households and businesses, remains at 4%, its highest level since the launch of the single currency in 1999. The refinancing rate and the facility rate marginal lending stand at 4.50% and 4.75% respectively.
Furthermore, the ECB has revised downwards its annual inflation forecast in the zone, from 2.7% to 2.3% for 2024. It now hopes to achieve its objective of inflation at 2% in 2025. During a press conference held on Thursday, the President of the ECB, Christine Lagarde, was cautious. “We are making good progress towards our inflation target”, but “we are not sufficiently confident” about reaching the target over time, she warned. We will know “a lot more in June,” she added.
Lower growth forecast
Scrutinized by the financial markets and the ECB, so-called core inflation, that is to say without the – very volatile – prices of energy and food, slowed in February to 3.1%. , up from 3.3% in January. The ECB attributes this drop in inflation to its unprecedented monetary tightening campaign from July 2022 to control the surge in prices caused by the war in Ukraine.
The increase in borrowing costs at an unprecedented rate by the ECB had slowed demand for credit, affecting consumption and investment by businesses and households. The downside of this policy: the euro zone economy has been stagnating for almost a year and a half. In these new macroeconomic projections unveiled on Thursday, the ECB lowered its gross domestic product growth forecast for the euro zone in 2024 to 0.6%, compared to 0.8% previously. The ECB, however, maintained its growth forecast for next year at 1.5% and raised it slightly for 2026 to 1.6% (compared to 1.5% previously).
