Lower growth and more inflation forecasts the ECB

The European Central Bank (ECB) lowered its GDP growth forecast for this year to 3.7%, while raising its inflation forecast by almost 2 percentage points from 3.2 to 5.1%, given the economic impact of the war in Ukraine .

“This war will have a significant impact on economic activity and inflation, with rising energy and commodity prices, disrupting international trade and confidence,” said Christine Lagarde, president of the central bank.

Risks to the euro zone economy “have increased significantly” due to the conflict, he added.

“The euro zone economy is still expected to grow strongly in 2022, but at a slower pace than was expected before the war started,” Lagarde said.

Energy prices, which soared 31.7% in February, continue to drive inflation.

Energy “remains the main reason for this high rate of inflation and is driving up prices in many other sectors,” Lagarde said.

Prices, already affected by the high demand after the pandemic and the lack of supply, are now being pressured upwards by the war since Russia is one of the main energy suppliers of the European Union.

Wearing a blue and yellow lapel pin, Lagarde said the institution will keep all options open to protect the economy from the impact of war and high energy prices.

The central bank kept its main interest rates at their lowest level in history, in particular the negative rate of 0.5% that taxes part of bank liquidity not distributed as credit to the economy.

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