The European Central Bank confirmed its intention to hike interest rates at its July meeting and downgraded its growth forecasts.
The ECB announced that it intends to raise its key interest rates by 25 basis points next month. A further hike in the September meeting will be decided upon the inflation outlook.
“Beyond September, based on its current assessment, the Governing Council anticipates that a gradual but sustained path of further increases in interest rates will be appropriate,” the ECB said in a statement on Thursday. The bank also announced it will end a long-running bond buying scheme.
The ECB now expects annual inflation to reach 6.8% in 2022, declining to 3.5% in 2023 and 2.1% in 2024, marking a substantial increase from its March projections. Inflation in Europe surged last month to a record-high 8.1%.
The bank also cut its growth forecast for the eurozone from 3.7% to 2.8% for 2022, and from 2.1% to 1.6% for 2023.
Global markets had been waiting for the ECB’s decision, as high inflation keeps impacting the global economy. Now the ECB joined other central banks in raising rates.
The U.S. Federal Reserve began hiking rates in March and a 50-basis point hike in May, which was its largest increase in almost 22 years, with further aggressive hikes ahead.