The ECB raises interest rates by half a percentage point, to 3%

The ECB raises interest rates by half a percentage point, to 3%

The European Central Bank (ECB) this Thursday decided to raise interest rates by half a percentage point to 3%, the fifth consecutive increase, after eurozone inflation slowed for three consecutive months, and announced its intention to raise rates by another half a percentage point in March.

After the Governing Council meeting, the ECB announced that it is also increasing the credit facility, which it lends to banks overnight, by 50 basis points, to 3.25%, and the deposit facility, which reimburses excess reserves for one day, up to 2.50%.

Given the pressures on underlying inflation, the Governing Council plans to raise interest rates by a further 50 basis points at its next monetary policy meeting in March and will then assess the future stance of its monetary policy. in a statement. .

The ECB believes that “maintaining interest rates at restrictive levels will reduce inflation over time by moderating demand, and will also protect against the risk of a sustained upward shift in inflation expectations.”

In any case, the ECB argues, “future decisions by the Governing Council on official interest rates will continue to be data-driven and follow an approach where decisions are adopted at each meeting.”

Year-on-year inflation in the euro area fell by seven-tenths to 8.5% in January and has fallen for three consecutive months, fueling hopes that price increases in the euro area have peaked.

But the core, in which energy, food, tobacco and beverages are discounted, remained at 5.2%.

Moreover, since July last year, the euro area economy has weathered the rise in the money price well and has managed to evade the recession for the time being.

The ECB began its fastest cycle of rate hikes since its inception in 1999 in July last year, with four consecutive hikes in six months from 250 basis points last year, to which is added today’s 50 basis points to curb high inflation in the eurozone. which in 2022 was sometimes close to 11%.

Source: El heraldo