The European Central Bank raised interest rates by 75 basis points Thursday in a bid to tame sky-high inflation.
Reuters
The European Central Bank raised interest rates by 75 basis points for the 2nd time in a row Thursday.
The central bank opted for another rate hike to tame soaring inflation and promised more.
The euro fell below $1 after the ECB decision, extending its fall to 0.9%.
The European Central Bank raised interest rates by 75 basis points for a second meeting in a row Thursday, as its tries to tame red-hot inflation without upending the eurozone economy.
The ECB’s governing council said its base deposit rate will increase from 0.75% to 1.5%, as it matched the record-sized hike it implemented in September.
The central bank started its tightening program in July, when it raised rates for the first time in 11 years with a 50 basis point increase.
The ECB is battling to curb soaring prices across the continent. Eurozone inflation hit a record high of 10% in September, as disruption caused by Russia’s ongoing war in Ukraine squeezes food and gas supplies.
“The Governing Council took today’s decision, and expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target,” the central bank said in a statement.
“Inflation remains far too high and will stay above the target for an extended period,” it added. “In recent months, soaring energy and food prices, supply bottlenecks and the post-pandemic recovery in demand have led to a broadening of price pressures and an increase in inflation.”
The central bank started its tightening program in July, when it raised rates for the first time in 11 years with a 50 basis point increase.
The euro fell below dollar parity to $0.9994 after the ECB decision, having traded at $1.0022 just before. It had fallen 0.93% at last check.
A second consecutive 75 basis point hike shows means that the ECB is now moving into “restrictive territory” as it tried to curb price rises, according to analysts.
“At the current juncture of a looming recession and high uncertainty, normalizing monetary policy is one thing but moving into restrictive territory is another thing,” ING’s global head of macro Carsten Brzeski said.
“With today’s rate hike, the ECB has come very close to the point at which normal could become restrictive.”