Mon. Sep 25th, 2023

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(Kitco News) – The gold market is holding steady gains, seeing little reaction as the European Central Bank raised its three interest rates by 75 basis points.
The aggressive rate hike was largely priced in to the market as the central bank focus on cooling inflation pressures. In a hawkish stance, the ECB also said that it expects to continue to raise interest rates through the rest of the year.
“The Governing Council took today’s decision, and expects to raise interest rates further, because inflation remains far too high and is likely to stay above target for an extended period. According to Eurostat’s flash estimate, inflation reached 9.1% in August,” the ECB said in its monetary policy statement.
The gold market is not seeing much reaction to the European rate hike. December gold futures last traded at $1,733 an ounce, up 0.30% on the day. 
The ECB said that a perfect storm of soaring energy and food prices, demand pressures and ongoing supply bottlenecks continue to drive up inflation.
“Price pressures have continued to strengthen and broaden across the economy and inflation may rise further in the near term,” the ECB said.
The central bank also released its latest economic staff projections, significantly revising their inflation outlook higher to 8.1% this year, up from the previous estimate of 6.8%. Inflation is expected to rise 5.5% in 2023m up from the June estimate of 3.5%. Consumer prices are expected to rise 2.3% by 2024.
The ECB also revised is growth forecast lower in the next two years. The central bank sees the European economy growing 3.1% this year, up from the June forecast of 2.8%. However, for 2023, GDP is expected to grow 0.9%, down from the previous estimate of 2.1%. GDP is expected to rise 1.9%, down from the June projection of 2.1%.
"After a rebound in the first half of 2022, recent data point to a substantial slowdown in euro area economic growth, with the economy expected to stagnate later in the year and in the first quarter of 2023," the ECB said. "Very high energy prices are reducing the purchasing power of people’s incomes and, although supply bottlenecks are easing, they are still constraining economic activity. In addition, the adverse geopolitical situation, especially Russia’s unjustified aggression towards Ukraine, is weighing on the confidence of businesses and consumers."
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