The European Central Bank (ECB) has set interest rates at an all-time high in an attempt to combat ongoing inflation.
For the 10th straight meeting, the Governing Council has elevated the deposit rate from 3.75% to an unparalleled 4%, marking the most assertive series of rate hikes in the bank’s existence.
Deutsche Bank highlighted that this 15-month escalation by the ECB surpasses any seen before, even when compared to Bundesbank records dating back to 1949.
In just over a year, the ECB’s principal deposit rate has skyrocketed from minus 0.5% to its peak since the inception of the euro in 1999.
This decision follows the revision of inflation estimates for the eurozone for the current year and 2024, projected at 5.6% and 3.2% respectively.
The intent behind these heightened interest rates is to amplify credit costs, aiming to decelerate the economy and reduce the 5.3% yearly inflation across the region, which significantly exceeds the ECB’s 2% goal.
Christine Lagarde emphasized that the possibility of a future reduction in borrowing costs “was not even mentioned” after the ECB increased interest rates to 4pc.
During her ongoing press conference in Frankfurt, she stated: “Inflation has decreased, and our aim is for it to continue on that trajectory.”
When inquired if the ECB actions might exacerbate a slump in the eurozone’s economy, she replied: “Our motive is not to induce a recession but to ensure price stability.”
