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Saturday, December 10, 2022

European Central Bank raised interest rates again

FRANKFURT, Germany ( Associated Press) – The European Central Bank on Thursday again raised a major interest rate hike aimed at curbing inflation, the fastest pace of rate hikes in the euro’s history, raising questions about how much interest it will raise. How far do you intend to raise rates? Banks in the face of the threat of an impending recession.

ECB President Christine Lagarde told reporters that the eurozone economy would weaken early next year. He said that “inflation is reducing people’s real income and raising business costs” and is stifling spending and production.

The 25-member Governing Council meeting in Frankfurt raised its benchmark interest rates by three-quarters of a percentage point, matching its record increase last month and adopting the same strategy of the Federal Reserve, the US central bank, which raised its benchmark interest rates for three quarters. raised rates in marks for the third time in a row last month.

“Inflation remains very high and will remain above target for an extended period of time,” the ECB said in a statement.

In just three months, the European Bank raised rates by 2 percentage points for 19 countries in the euro area, a range that took 18 months during its last extended phase of growth in 2005–2007 and 17 months in 1999–2000. .

Central bank interest rates affect credit costs for businesses and consumers. The increase is aimed at higher energy prices linked to Russia’s war in Ukraine, disruptions in supply chains following the coronavirus pandemic, and revived demand for goods and services, following an easing of restrictions due to COVID-19.

Quarter-point growth has generally been the norm for central banks. But before that inflation rose to 9.9% in the eurozone and 8.2% in the United States, its highest level in nearly 40 years.

Inflation deprives consumers of purchasing power, raising fears of a possible recession in the United States and the euro area by the end of this year or early next year.

The ECB expects inflation to fall to 2.3% by the end of 2024.

Higher rates can control inflation by making borrowing, spending and investing more expensive, which reduces demand for goods. But the concerted effort to raise rates has also raised concerns about growth and its impact on the stock and bond markets.

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