The ECB approves another sharp rise in interest rates of 0.75 points despite the risk of recession

The threat of a recession in the euro zone has not deterred the European Central Bank (ECB) in its all-out war against inflation.

The institution has decided to increase the price of money by three quarters of a point, up to 2%, according to a note released by the Eurobank.

Until last September, the monetary authority had never raised interest rates by more than half a point in its 24-year history.

However, persistent inflation of 9.9% has led the entity chaired by Christine Lagarde to raise it by 0.75 points on two occasions, returning rates to levels of more than a decade ago.

In addition, the entity warns that it plans to "continue to increase interest rates to ensure the timely return of inflation to its medium-term target of 2%".

Lagarde appears in Frankfurt from 2:00 p.m.

Just a year ago, the October meetings in Frankfurt were almost a formality.

Not anymore.

The energy crisis caused by Russia's attacks on Ukraine amplified the price increases derived from the return to normality after more than a year of lockdowns and restrictions due to the pandemic.

Inflation then emerged as the main problem in Europe.

Even Spain, where prices are beginning to relax, identifies inflation as

in the budget plan sent to Brussels.

But now the crisis is no longer limited to the escalation of prices: international organizations take for granted a recession in Germany and Italy that could drag down the rest of the euro zone.

Lagarde warned in September that increases of 0.75 points would not be the norm.

With this notice he wanted to placate the voices of those who believe that, in times of uncertainty, the ECB should use short gears instead of going full throttle.

However, the

– the defenders of orthodoxy – have for now imposed their story in the face of the double-digit price increases suffered by Germany, the Netherlands or the Baltic nations.

Before this meeting, in fact, the

– those who suggest a more lax policy – ​​barely spoke.

The discussion, they say from the ECB, will take place in December, when the institution will have new economic forecasts and will have to decide to continue raising rates even knowing that they can definitively stifle economic activity.

But, for now, the institution warns that this is not the last rate hike and that more will arrive in the coming months.

The rise in rates was not the only file that the members of the Governing Council had to resolve.

The ECB also had to resolve this Thursday how to put an end to the heaven-sent benefits that banks have been obtaining as a result of the refinancing operations, the so-called TLTROs.

These are instruments that have been deployed since 2019 with a favorable cost to banks (which came to be -1%) to favor credit towards companies and citizens.

Given the excess liquidity of banks, entities are placing part of that excess in the ECB, which now offers them a deposit facility rate of 0.75%, which could rise to 1.5%.

Markets are also looking for clues as to when the ECB will start to reduce its balance sheet, as some

have begun to suggest .

After extensive debt purchase programs, this now reaches 8.76 trillion euros.

The institution has already begun to stop net purchases of debt, but continues with the reinvestment of amortizations.

Analysts believe that the Eurobank will not launch sales until the bulk of the rate hike is completed, so they do not expect it to release ballast until the first half of 2023.