Euro Area Interest Rate2022 Data - 1998-2021 Historical - 2023 Forecast - Calendar

The ECB will continue its policy normalisation path and will go as far as necessary to bring Euro Area inflation back to the 2% target, President Lagarde said during a speech at the ECB's annual forum in Portugal. Lagarde confirmed that net asset purchases will end on July 1st and interest rates will be raised by 25bps also in July, the first rate hike in 11 years. At the same time, Lagarde stressed the central bank will be flexible when net asset purchases end and could reinvest some redemptions in bond markets where orderly transmission is at risk. The ECB is preparing a new anti-fragmentation tool to help tighten widening spreads among countries such as Italy and Spain where bond yields soared since the central bank took a more hawkish stance in June. Still, the new instrument will have to be effective ad proportionate and containing sufficient safeguards to preserve the impetus of member states towards a sound fiscal policy.

The ECB decided to accelerate the completion of the design of a new anti-fragmentation instrument aimed to prevent unwarranted jumps in euro-area bond yields during an emergency meeting on June 15th 2022. Policymakers also decided to apply flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to preserving the functioning of the monetary policy transmission mechanism. The moves came after Italian bond yields surged much more than in other countries, as the central bank is set to start raising borrowing costs next month. The ECB said during its June meeting that it will end net asset purchases under its APP as of July 1st 2022 and intends to raise the key ECB interest rates by 25bps in July as inflation in the Euro Area shows no signs of picking. The central bank also said it expects to raise borrowing rates again in September and the rise could be bigger than the one in July, if the inflation outlook deteriorates.

The ECB said during its June meeting that it will end net asset purchases under its APP as of July 1st 2022 and intends to raise the key ECB interest rates by 25 basis points in July. It will be the first increase in borrowing costs in more than a decade, as inflation in the Euro Area shows no signs of picking. The central bank also said it expects to raise borrowing rates again in September and the rise could be bigger than the one in July, if the inflation outlook deteriorates. From September, a gradual but sustained path of further increases will be appropriate. On the prince front, inflation projections were revised up to 6.8% in 2022, 3.5% in 2023 and 2.1% in 2014. The growth outlook was also revised to a lower 2.8% this year and 2.1% next year but for 2024, the economy is seen expanding faster by 2.1%. The key refinancing operations rate currently stands at 0%, the marginal lending facility rate at 0.25% and the deposit lending rate at -0.5%, all at record low levels.