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The European Central Bank announced Thursday a new rate decision.
Daniel Roland | Afp | Getty Images
The European Central Bank on Thursday announced a new rate increase of 25 basis points, taking its main rate to 3.5%.
The central bank has raised rates since July 2022 in an attempt to bring down record-high inflation across the region. The latest inflation reading showed prices cooling down at a faster-than-expected pace, with headline inflation coming in at 6.1% in May and core inflation, which excludes volatile items, coming in at 5.3%. This remains well above the ECB’s target of 2% headline inflation, however.
An additional challenge for the ECB is the lackluster growth in the region. Data released earlier this month showed the 20-member area entered a technical recession in the first quarter of this year. Gross domestic product came in at -0.1% for the three-month period to March, after a 0.1% contraction in the last quarter of 2022.
Poor economic performance might limit the ECB’s ability to increase rates further to rein in inflation. ECB officials have nevertheless previously suggested that it is more important to bring down prices than to avoid an economic slowdown.
The latest ECB decision followed an announcement stateside that the Federal Reserve decided to leave rates unchanged. Chairman Jerome Powell said policymakers needed more information to decide next steps, but the central bank projected another two quarter-percentage-point moves later in the year.
This is a breaking news story and will be updated shortly.
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