ECB Raised Rates To Historic High

The Governing Council of the European Central Bank (ECB) has decided to raise its three benchmark interest rates by 25 basis points.

Thus, the rate is set at 4.5% on main refinancing operations, 4.75% on marginal refinancing operations, 4% on deposits with the Central Bank (the maximum level in history). This is the tenth increase in a row, at the same level as on July 27 – a quarter of a percentage point.

“Inflation continues to decline but is expected to remain too high for too long,” the ECB said in a note. “The Governing Council is committed to ensuring that inflation returns to the 2% target on time over the medium term. To make further progress towards this goal, the Governing Council decided today to raise the ECB’s three key interest rates by 25 basis points.”

Macroeconomic forecasts for the eurozone call for inflation rates of 5.6% in 2023, 3.2% in 2024, and 2.1% in 2025, rising in 2023 and 2024 and falling in 2025 due to price evolution for energy resources. The ECB also revised downward its economic growth forecasts: 0.7% in 2023, 1.0% in 2024, and 1.5% in 2025.

The ECB’s position does not provide for easing of monetary policy tightening in the coming months.

“The ECB’s key interest rates have reached a level that, if maintained for a sufficiently long period, will make a significant contribution to a timely return of inflation to the target (2% – ed.),” explains the financial institution led by Christine Lagarde. “Future decisions of the Governing Council will ensure that the ECB’s key interest rates are set at sufficiently restrictive levels for as long as necessary.”