The European Central Bank (ECB) announced on Thursday that it would raise its policy rate by 0.5 percentage point. As a result, the interest rate is 0.0% and is no longer negative for the first time in eight years. In this way, the central bank hopes to reduce inflation. It will probably also allow us to receive interest on our savings soon.
Today, many policymakers, economists and banks are closely following the ECB’s decision. The central bank faces the challenge of limiting the sharp rise in the prices of goods and services. It should also protect European economies from recession.
It was already known that the ECB would raise interest rates, but in recent weeks the regulator has been under pressure to propose a significant hike. After all, prices for goods and services rose sharply. By raising interest rates, people will save more and therefore spend less. It also ensures that companies are less likely to borrow. All this should slow inflation.
At the same time, a recession threatens, because Russia’s energy supply is at risk. It is more practical for us to spend more to keep interest rates low to avoid a contraction of the economy. However, the ECB now chooses to raise interest rates significantly.
Interest rates could go even higher this year. But the ECB said nothing about it on Thursday, except that it depends on how inflation develops.
The ECB also announces a new tool to monitor outliers in the European market.
Source: NU
John Cameron is a journalist at The Nation View specializing in world news and current events, particularly in international politics and diplomacy. With expertise in international relations, he covers a range of topics including conflicts, politics and economic trends.
