ECB Raises Rates to Highest Level Since 2000
On Thursday, the European Central Bank made history by raising its deposit rate to its highest level since 2000.
This marked the ninth consecutive increase, bringing the rate from 3.50% to 3.75%. The bank, however, did not explicitly indicate more hikes in the future amidst a challenging economic environment.
In its policy statement, the ECB ensured that future decisions would maintain the key interest rates at sufficiently restrictive levels. This is a departure from the previous statement in June, which implied more rate increases.
Despite inflation in the eurozone being halved since last October, it still stands at 5.5%, significantly above the ECB’s 2% target.
The economy has shown signs of strain, with credit creation, loan demand, and economic activity all slowing down. The ECB’s rapid pace of rate hikes, totaling 4.25 percentage points in a year, has contributed to these effects.
READ MORE: Binance Pulls Crypto License Application in Germany
However, the ECB believes inflation will decrease further in the year’s remaining months, though it is expected to stay above target for some time.
The focus now shifts to how long current interest rate levels will be maintained. The recent decision also affected borrowing costs, with the rate for ECB’s weekly auctions increased to 4.25% and daily loans costing 4.50%.