Europe | Staying the course to tame inflation

Summary

The ECB covered further ground in its fight against inflation as it raised key interest rates by another 25 bps, attributing the move to its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission; nonetheless made clear that its journey is not over.

Key points

• Key points:
• The ECB raised its key interest rates by 25 bps, affirming that it is not pausing and practically committed to further hike in July.
• In a hawkish move, staff inflation projections were revised upwards, mainly due to labor cost pressures, though the ECB does not see a price-wage spiral.
• On QT, the ECB confirmed the discontinuation of the reinvestments under the APP as of July 2023.

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