The bank announced that it would raise the cost of borrowing by 25 basis points in July — its first rate hike in more than a decade — and said a bigger hike could follow in September “if the medium-term inflation outlook persists or deteriorates.”
The ECB raised its forecast for annual inflation in the eurozone “significantly” to 6.8% this year, and said it would remain just above its target of 2% in 2024. It also cut its growth forecasts. GDP for the 19 countries that use the euro is now projected to rise by 2.8% in 2022 and by just 2.1% next year.
Eurozone inflation hit an all-time high of 8.1% last month, according to Eurostat.
The central bank is trying to strike a delicate balance between raising rates to hold down rising prices, but not by so much that it tips the region into a recession.
— This is a developing story and will be updated.