ECB President Christine Lagarde had all but promised the quarter-percentage point increase. That puts the focus at her post-meeting news conference on whether the bank will raise rates again at its September meeting or hold off after a record series of rate hikes. Central banks around the world have been raising borrowing costs to combat inflation unleashed by higher energy prices after Russia invaded Ukraine and supply chain backups as the global economy recovered from the coronavirus pandemic.Now, the question is whether the rapid rate hikes are reaching their end.The ECB move followed a decision by the US Federal Reserve on Wednesday to raise its key rate for the 11th time in 17 months. Fed Chair Jerome Powell was noncommittal about whether more rate increases might be coming, though inflation is lower in the US - at three per cent - than it is in Europe.Inflation in the eurozone has fallen from its peak of 10.6 per cent in October to 5.5 per cent in June, still well above the bank’s target of two per cent considered best for the economy.Households and businesses are facing a double hit from Price spikes and higher rates, which make it more expensive for people to get loans to buy homes and cars or for companies to get new equipment or build facilities.Rates are working their way through the economy, weighing on home prices and construction activity, and are designed to work so people spend less and prices come down. But they can also weigh on economic growth, and the eurozone already has seen back-to-back quarters of contraction.With Thursday’s quarter-point increase, the ECB has raised its benchmark deposit rate from minus 0.5 per cent to 3.75 per cent in one year, the fastest credit tightening since the Euro currency was launched in 1999.The rate hikes are already working: House prices have started to decline after a yearslong rally, while business loans are at their lowest level since statistics started in 2003. The outlook for construction companies in Germany also hit its lowest level since 2010.Fears about recession are focusing on Germany, Europe’s industrial powerhouse and largest economy. It is the only developed economy that the International Monetary Fund expects to shrink this year.
World News
27 Temmuz 2023 - 16:00
The European Central Bank raises its benchmark rate by 0.25 - its highest level since May 2001
The European Central Bank has raised interest rates back to their record high, warning consumer prices are still rising too fast while keeping its options open for further increases.
World News
27 Temmuz 2023 - 16:00