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European Central Bank Raises Key Interest Rates to Combat Inflation Canva

European Central Bank Raises Key Interest Rates to Combat Inflation

Written by  May 05, 2023

The European Central Bank (ECB) announced on Thursday that it has decided to raise key interest rates by 0.25 percentage points due to continued strong inflationary pressures.

As a result, the interest rate for main refinancing operations will be 3.75% from May 10th, and the interest rate on overnight deposits from banks will be 3.25%. The overnight lending rate will be four percent from now on.

The ECB reiterated that inflation will remain too high for too long, citing the repeated increase in interest rates.

Inflation has slowed for the fifth consecutive month, but food prices continue to rise.

This is the seventh consecutive time that the eurozone's central bank has raised key interest rates for the 20 countries that use the euro.

Since July of last year, when the cycle of raising interest rates began, interest rates have increased by a total of 3.75 percentage points in order to curb high inflation.

The Governing Council will continue to apply a data-driven approach to determine the appropriate level and duration of the tightening, according to the ECB statement.

Decisions on interest rates will continue to be based on the assessment of inflation prospects in light of the latest economic and financial data, the dynamics of underlying inflation, and the intensity of monetary policy transmission.

As stated in the statement, the portfolio of the asset purchase programme (APP) is being reduced at a moderate and predictable pace as the Eurosystem is not reinvesting the principal of maturing securities in full. The average monthly reduction amounts to 15 billion euros until the end of June 2023.

The Governing Council expects that from July 2023, it will no longer carry out reinvestments under the APP, according to the ECB statement.

 

The Voice of Dubrovnik

THE VOICE OF DUBROVNIK


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