The European Central Bank raised interest rates again

The European Central Bank raised interest rates again
Written by admin

The European Central Bank imposed another big interest rate hike on Thursday, as policymakers tried to curb record-high inflation in the region.

The central bank, which sets monetary policy for the 19 countries that use the euro, raised interest rates by three-quarters of a percent. Matching previous growth After slowing rate hikes last month – His July increase It was the first in more than a decade – the bank said it quickly tightened its policy stance as inflation proved worse and more persistent than the bank expected.

Consumer prices in the eurozone rose an average of 9.9 percent in September from a year earlier, the fastest pace on record, driven by energy and food prices.

“Inflation remains high and will remain above target for an extended period,” the bank said in a statement on Thursday.

The challenges facing central bankers have increased in the past few months as lawmakers have taken more steps to protect households and businesses from rising prices. Central bankers caution that monetary policy should not act in conflict with monetary policy. Britain has become an international example of this risk. last week, Liz Truss resigned as Prime Minister His tax cuts sparked turmoil in financial markets.

European governments disagreed As they should respond to rising energy prices, rich countries take advantage of their better financial position to spend more. Germany recently announced a €200 billion ($201 billion) aid plan for its households, businesses and industry.

Central bankers’ ability to control inflation has been severely tested over the past year. There was once an expectation that high inflation would pass quickly, especially when it was initially driven by high and volatile energy prices that policymakers could not control. But economies have faced a series of economic shocks that have spurred central banks into action.

Although inflation is well above the central bank’s 2 percent target, analysts are already questioning how high eurozone policymakers will be able to raise interest rates amid the recession.

The bank deposit rate, which is what banks get for depositing money with the central bank overnight, rose to 1.5 percent on Thursday. This is still a relatively loose policy stance compared to central banks in many other countries. In the US, the Federal Reserve’s policy rate target is between 3 and 3.25 percent. The Bank of England’s main policy rate is set at 2.25 percent.

European Central Bank officials have said they need to reach at least a neutral rate, where policy neither stimulates nor constrains economic growth, but estimates of that neutral rate vary, and the central bank has not released its own estimates.

About the author


Leave a Comment