The European Central Bank (ECB) has raised on Thursday by half a percentage point, the first increase in more than a decade and a bigger-than-expected move as it joins the global fight against inflation.
The ECB raised its benchmark deposit rate by 50 basis points to zero percent, breaking its own guidance for a 25-basis point move. This is the euro zone central bank’s first-rate hike for 11 years.
“Today, in line with the Governing Council’s strong commitment to its price stability mandate, the Governing Council took further key steps to make sure inflation returns to its 2% target over the medium term.” the ECB said in a statement. “The Governing Council decided to raise the three key ECB interest rates by 50 basis points and approved the Transmission Protection Instrument (TPI).”
Ending an eight-year experiment with negative interest rates, the central bank also jacked up its main refinancing rate to 0.50 percent and promised further rate increases possibly as soon as its next meeting on September 8.
“The Governing Council decided to raise the three key ECB interest rates by 50 basis points. Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 0.50%, 0.75% and 0.00% respectively, with effect from 27 July 2022.”
“Further normalisation of interest rates will be appropriate,”
“The frontloading today of the exit from negative interest rates allows the Governing Council to make a transition to a meeting-by-meeting approach to interest rate decisions,”
