ECB Raises Rate To Record High And Signals End Of Hikes  

• The European Central Bank raised its key interest rate to a record peak on Thursday and signalled this will likely be its final move in a more-than-year-long fight against stubbornly high inflation.
• The central bank for the 20 countries that share the euro also raised its forecasts for inflation, which it now expects to come down more slowly towards its 2% target over the next two years, while cutting its expectations for economic growth.
• That illustrated the dilemma the ECB faced at the meeting, with prices still rising at more than twice its target rate but economic activity struggling under high borrowing costs and a downturn in China. Against this backdrop, the ECB sent a clear message it was probably done raising rates.
• "Based on its current assessment, the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target," the ECB said.
• This was expected to happen more slowly than at the time of the ECB's previous projections in June, with inflation now seen at 5.6% in 2023, 3.2% in 2024 and 2.1% in 2025.
• The upgrade to the 2024 estimate - which had been reported by Reuters earlier - was likely to have played a significant role in discussions as policymakers weighed the risk inflation, currently still above 5%, would get stuck at a high level.
• Once its rate increases end, the ECB is likely to begin a debate on mopping up more of the cash it pumped into the banking system through various bond-buying schemes over the last decade, although no decision on that matter was expected this week.

(Source: Reuters)