The Council of the European Central Bank (ECB) raised the interest rate for the euro zone for the tenth time in a row, this time also by 0.25 percentage points. He raised the deposit interest rate to four percent, the highest level since the introduction of the euro in 1999.
At the same time, the ECB Council indicated that it would be this may be the last hike in more than a year of fighting high inflation.
Central interest rate for main refinancing operations will now be at 4.50 percent, again the highest since before the last major financial and economic crisis, which ushered in more than a decade of looser monetary policy. Interest rate for the open offer of the border loan meanwhile rose to 4.75 percent, foreign press agencies report.
The ECB concluded that the persistence of inflation at an excessively high level is stubborn and that it will remain high for some time. Inflation forecast for this year and next year, they increased for and reduced in 2025. Inflation is expected to reach 5.6 percent this year, 3.2 percent in 2024 and 2.1 percent in 2025. In June, they predicted 5.4% inflation for this yearthree percent for 2024 and 2.2 percent for 2025.
At the same time, the ECB lowered its growth forecasts for euro area over the next three years, as tight financing conditions are expected to reduce domestic demand at a time when international trade is also weakening. According to the new forecast, the economy will grow by 0.7% this year, 1% in 2024 and 1.5% in 2025. Forecasts are lower than previous ones, for this year for 0.2 percentage points, for the year 2024 for 0.5 percentage points and for the year 2025 for 0.1 percentage point.
Inflation remains high
The cost of living in the euro area rose in August compared to the same period last year for 5.3 percent, even in Slovenia and Germany for more than 6 percent. Core inflation, i.e. prices excluding energy and food, remains high. This year, average wages have risen across Europe. Energy prices are also rising again.
On the other hand, the data on economic growth are a real disappointment, UMAR predicts 1.6% growth for Slovenia this year, industrial production is in decline, and global demand is fragile. Munich Institute IFO reports that as many as a fifth of German construction companies canceled projects in August – and this at a time when there is a severe shortage of new housing. Current interest rates are already too high for investments in their construction, reported Maja Derčar, correspondent of RTV Slovenia from Berlin.
Source: Rtvslo
