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Christine Lagarde: "The Ukraine war will have a significant impact"
Photo: ANDREW CABALLERO-REYNOLDS / AFP
According to the European Central Bank (ECB), the war in Ukraine is dampening the economic prospects for the euro area and fueling inflation through higher energy prices.
According to the forecast presented on Thursday, the rate of inflation will be 5.1 percent this year and thus significantly higher than previously assumed.
In December, the central bank had still expected 3.2 percent.
"The Ukraine war will have a significant impact on economic activity and inflation through higher energy and commodity prices, disruption to international trade and weakening confidence," ECB President Christine Lagarde said at the press conference following the interest rate meeting.
The ECB had previously decided to leave its key interest rate at a historically low level and to scale back its bond purchases more quickly.
In the coming year, the monetary watchdogs are expecting an annual average price increase of 2.1 percent.
For 2024, the ECB predicts an inflation rate of 1.9 percent in the common currency area.
The central bank is aiming for an annual inflation rate of two percent for the currency area of the 19 euro countries and is at least temporarily willing to accept moderately exceeding or falling below this mark.
US inflation at its highest in 40 years
According to the latest ECB forecast, the economy in the euro area will grow by 3.7 percent this year.
Gross domestic product is expected to grow by 2.8 percent in 2023 and by 1.6 percent a year later.
Meanwhile, consumer prices in the US rose at their fastest pace in 40 years in February.
Goods and services cost an average of 7.9 percent more than in the same month last year, the Labor Department said.
This is the highest value since January 1982. Because of the strong inflation and the booming labor market at the same time, the US Federal Reserve is heading for an interest rate turnaround.
Central Bank Chairman Jerome Powell has repeatedly signaled this.
A first step upwards is expected on the financial markets in mid-March, with further hikes likely to follow.
hej/dpa-AFX/Reuters
