KOF Monetary Policy Communicator, June 2022

The Governing Council decided to end net asset purchases under the asset purchase programme (APP) as of 1 July 2022. The ECB will raise the key ECB interest rates by 25 basis points at the next monetary policy meeting and again in September, when a larger increment might be appropriate. After that, the Governing Council anticipates further gradual but sustained increase in interest rates.

According to Eurostat, Euro area annual HICP inflation was 8.1% in May. This increase was primarily caused by surging energy and food prices, including due to the impact of the war. However, inflation pressures have broadened and intensified, with prices for many goods and services increasing strongly. This development is reflected in an upward revision of the ECB’s inflation projections: Eurosystem staff projections foresee inflation at 6.8% in 2022, 3.5% in 2023 and 2.1% in 2024 (March projections: 5.1% in 2022, 2.1% in 2023 and 1.9% in 2024). Headline inflation at the end of the projection horizon is projected to be slightly above the ECB’s target.