ECB, US, UK, and Switzerland Leave Rates Unchanged

Following the Federal Reserve System (FRS), the European Central Bank (ECB) also decided to keep the value of money unchanged. Interest rates on core refinancing operations, margin lending, and the deposit facility will remain unchanged at 4.50%, 4.75%, and 4.00%, respectively. Also today, the Bank of England (BOE) announced no change in the UK rate at 5.25%, and the Central Bank of Switzerland (BNS) announced the same at 1.75%.

“Inflation, despite declining in recent months, is likely to return to temporary growth in the short term,” the ECB documented. “According to the latest forecasts for the eurozone, it should gradually decline over the next year. Core inflation recorded a further decline. However, domestic price pressure remains high, mainly due to strong increases in unit labor costs.” The target remains at 2%, which can be achieved in 2025. Downward forecasts call for headline inflation to be 5.4% in 2023, 2.7% in 2024, 2.1% in 2025, and 1.9% in 2026. Inflation excluding energy and food components is projected at 5.0% in 2023, 2.7% in 2024, 2.3% in 2025, and 2.1% in 2026.

The ECB also highlights the fact that restrictive policies continue to have an effective impact on the economy, slowing demand and helping to reduce inflation. Economic growth will be limited in the short term, and then growth should resume with greater vigor. “Beyond this horizon, the economy should recover thanks to rising real incomes – as families benefit from lower inflation and rising wages – and improving external demand.”

Eurosystem analysts estimate growth at 0.6% in 2023, 0.8% in 2024, and 1.5% in 2025 and 2026.