Luxtoday

The ECB raises its key rate again, another rise likely in the future

Last time updated
09.09.22
The ECB raises its key rate again, another rise likely in the future

On Thursday, September 8, the ECB raised its key rate by 75 percentage points. There’s never been such a rapid increase before. The bank has clearly prioritized fighting inflation despite a potential recession and possible gas rationing this winter.

Even with this dramatic change, the ECB is still lagging behind some of its peers, such as the US. Some analysts see such frequent rate hikes as an attempt to «catch up on lost time».

An increase in key rates makes loan borrowing less attractive to consumers and slows down business development. It also reduces the purchasing power of households by artificially reducing demand. However, there is also a different side to it. This is one of the most effective methods of fighting inflation ever devised. In addition, it helps grow the deposits’ attractiveness.

Following yesterday’s meeting, the head of the ECB, Christine Lagarde, noted that more increases are expected in the future. For now, inflation is too high to simply turn a blind eye to it. Moreover, the risk remains of prices continually rising until the end of the year.

Send feedback
Last time updated
09.09.22

Source: Chronicle

Authors: Danila

Related Materials