Record inflation: ECB raises key interest rate sharply again
Created: 2022-10-27Updated: 2022-10-27 2:59 p.m
By: Lisa Mayerhofer
In view of record inflation and the weak euro, the European Central Bank (ECB) is raising interest rates again.
It now rises to 2.0 percent.
Frankfurt/Main – Europe's currency watchdogs are stepping up the pace in the fight against record inflation in the euro area.
The Council of the European Central Bank (ECB) decided on Thursday to raise interest rates again by 0.75 percentage points.
This increases the key interest rate at which commercial banks can borrow fresh money from the ECB to 2.0 percent, as the central bank announced in Frankfurt.
With its interest rate hikes, the ECB wants to make loans more expensive in order to curb demand and thus counteract high inflation rates.
The Governing Council assumes that further rate hikes will follow.
ECB President: "We will do what we have to do"
ECB President Christine Lagarde recently reaffirmed the determination of the central bank in the fight against high inflation.
“We will do what we have to do.
That means raising rates in the next few meetings,” Lagarde said.
If the ECB does not fulfill its mandate to ensure price stability, "it would damage the economy much more".
After much hesitation, the Governing Council of the ECB raised interest rates in the euro area for the first time in eleven years at its meeting on July 21.
The second increase followed on September 8 – for the first time in the history of the central bank by 0.75 percentage points.
For a long time, the ECB had interpreted the high inflation as temporary and only started raising interest rates later than, for example, the US Federal Reserve.
The so-called deposit rate, which credit institutions receive when they park money with the ECB, rises to 1.50 percent after Thursday's decision.
To the delight of millions of savers, the phase of negative interest rates ended with the first rate hike in July.
Since then, commercial banks no longer have to pay 0.5 percent interest on part of the money that they park with the central bank.
As a result, most institutes abolished negative interest rates for private customers and are groping their way up in interest rates on savings.
High energy prices: Eurozone inflation at record high
Inflation in the euro area rose to a record high in September, driven by high energy and food prices.
Compared to the same month last year, consumer prices increased by 9.9 percent.
It was the highest value since the euro was introduced as book money in 1999.
However, there is concern that the economy, which is already suffering from supply bottlenecks and the consequences of the Ukraine war on the energy market, for example, will be slowed down by normalizing the monetary policy, which had been ultra-loose for years, too quickly.
The ECB therefore reserves the right to help heavily indebted euro states by buying bonds.
(dpa/lma)