2023-09-14 10:29:38 ET
Sept. 14 (UPI) -- The European Central Bank on Thursday raised three key interest rates by a quarter percentage point to 4% or more as inflation was weakening but still maintaining a stubborn grip over the eurozone economy.
The bank's Governing Council raised the rates by 0.25 points to 4.50%, 4.75% and 4% as part of a continuing effort to lower inflation to 2%, saying the move would "make a substantial contribution to the timely return of inflation to the target."
The increases take effect Sept. 20.
The central bank has now issued 10 consecutive rate hikes -- the last coming in July when it raised interest rates by a quarter point when inflation was about 6.1%, -- down from a peak of 10.6% in 2022 following Russia's invasion of Ukraine .
The Governing Council said it would continue to raise interest rates "at sufficiently restrictive levels for as long as necessary" to keep the eurozone economy from entering a recession.
Thursday's hike comes amid unfavorable economic data that showed inflation was expected to remain elevated through at least 2025, although progress had been made over the past year to knock a dent in rising costs.
Consumer inflation in the eurozone slowed in July by 0.2% to 5.3%, largely due to sharp drops in energy prices, according to estimates from Eurostat, the EU's main statistical agency.
Current economic projections for the eurozone show average inflation will top out at 5.6% in 2023, 3.2% in 2024 and 2.1% in 2025, with energy prices inflicting much of the financial pain.
Previously, bank analysts projected inflation to reach an average of 5.1% in 2023, 2.9% in 2024 and 2.2% in 2025.
Earlier this month, the European Union downgraded its growth forecast for 2023 to 0.8% from the 1% it projected in May, blaming weak consumption resulting from high and still increasing consumer prices for most goods and services.
In a statement, the bank noted that prices remain high across the 19 member states of the European Union, although overall costs showed signs of easing.
While previous interest rate hikes had helped to lower prices, loan demand was hurting as banks had raised the standards to qualify for financing -- a factor that will keep inflation in the cards a while longer for many nations.
International trade was also showing signs of weakening, leading to significantly lower economic growth projections over the next two years.