ECB to Continue Raising Interest Rates in 2023: What Does This Mean for You?

The European Central Bank (ECB) has been making headlines in 2022 with its monetary policy decisions, which have brought an end to an era of expansive policy and resulted in the highest interest rates in decades. 

As the eurozone continues to grapple with high levels of inflation, the question on everyone's minds is: what can we expect from monetary policy in 2023?
To understand the current situation, it's important to look back at the events of the past year. 

The post-pandemic supply crisis and the Ukraine war caused a price crisis in 2021 and 2022, leading to unprecedented levels of inflation in the eurozone. 

In response, the ECB, whose mandate is to maintain price stability by keeping inflation at 2%, has been forced to take action by raising interest rates.

In total, the ECB raised rates four times in 2022: in July (0.5%), September (0.75%), October (0.75%), and December (0.5%). As a result, the cost of money is now at 2.5%, the highest level since 2008.

So, what can we expect in 2023? The short answer is that we can expect more rate hikes. 

In December, the ECB stated that "the Governing Council has decided to raise interest rates today, and expects to continue raising them significantly, because inflation remains too high and is expected to remain above the target for too long." 

In fact, the organization is forecasting that inflation will stay above its 2% target until 2025, reaching 3.4% in 2024 and finally hitting 2.3% in 2025.

It's worth noting that the ECB's monetary policy decisions depend on data and will be made at each meeting. 

This means that the timing of future rate hikes is uncertain, but it's clear that they are likely to continue for the foreseeable future.

So, what does this mean for consumers and businesses? Higher interest rates can have a range of effects, including making mortgages and loans more expensive and benefiting savers. 

There is also the potential for increased risk in the stock market. It's important to stay informed and consider the potential impacts on your personal financial situation as the situation evolves.