UPDATE - European Central Bank hikes interest rates by 25bps to fight persistent inflation

UPDATES WITH MORE DETAILS

By Tuba Ongun

ANKARA (AA) – The European Central Bank on Thursday raised its three key policy interest rates by 25 basis points each to fight persistent inflation.

Despite its downward trend, the inflation is expected to remain "too high for too long," the bank said in a statement.

According to flash estimates released by Eurostat, the euro area's annual consumer inflation rate was stable at 5.3% in August, still above the bank's 2% medium-term target.

The rate on the main refinancing operations will be increased to 4.50%, effective from Sept. 20.

The deposit facility rate will be raised to 4% and the marginal lending facility rate will be increased to 4.75%.

The European Central Bank revised its euro area inflation projections upwards to 5.6% for this year and 3.2% for the next year due to a higher path for energy prices.

On the other hand, it cut eurozone inflation forecast for 2025 to 2.1%.

The bank slightly revised down the projected path trajectory for core inflation to an average of 5.1% this year, 2.9% in 2024, and 2.2% in 2025.

As increased borrowing costs dampen demand and international trade weakens, the bank decided to lower its growth projections significantly.

The gross domestic product in the euro area is expected to rise by 0.7% in 2023, 1.0% in 2024, and 1.5% in 2025.