ECB hikes again, revises core CPI forecasts higher

Rate-setters in Frankfurt hiked its main interest rates again, as expected, as inflation appeared set to remain "too high for too long".

In particular, the ECB pointed to past upwards surprises in prices and what the robust jobs market meant for the speed at which inflation would slow.

"The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner," the European Central Bank added in its policy statement.

Indeed, European Central Bank staff's latest set of economic projections, which were also published on Thursday, pointed to headline inflation remaining above its 2.0% target at the end of its three-year policy horizon.

Headline CPI gains were now seen averaging 5.4% in 2023, 3.0% in 2024 and 2.2% in 2025.

Core CPI meanwhile was now seen retreating more slowly, especially in 2023 and 2024, when it was pegged to decline to 5.1% and 3.0%, respectively, before slipping to 2.3% in 2025.

"Tighter financing conditions are a key reason why inflation is projected to decline further towards target, as they are expected to increasingly dampen demand," the ECB added.

"[...] The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction."

During her press conference, ECB President Christine Lagarde went as far as to pre-announce another rate hike at July's meeting, barring significant changes to its baseline scenario.

The ECB also confirmed that it would stop reinvesting the proceeds from its Asset Purchase Programme as of July 2023.

The interest rates on the ECB's main refinancing operations, its marginal lending facility and the deposit facility were all increased by 25 basis points to 4.0%, 4.25% and 3.50%, respectively, effective from 21 June 2023.