The European Central Bank (ECB) once once more raised its interest rates on Thursday and announced its intention to reduce the liquidity available to the banking sector, thus amplifying the tightening of its monetary policy which aims to fight inflation.
Fearing that the rise in prices would become firmly anchored in the euro zone economy as a whole, several months ago the ECB began to raise rates at an unprecedented pace while preparing to deprive banks of other support measures taken in recent years to promote credit and economic activity.
With this new increase, the third in as many meetings, the deposit facility rate is raised to 1.50%, its highest level since 2009, and its rise has reached 200 basis points since July. The refinancing rate was raised to 2.0% and the rate of its marginal lending facility to 2.25%.
More increases to come
“With this third consecutive significant increase in key rates, the Governing Council has removed a substantial part of the accommodative nature of the monetary policy stance,” the ECB said in a statement. She adds that the Governing Council “plans to continue to raise key interest rates, to ensure that inflation returns to its medium-term target of 2% as soon as possible”.
The markets expect the deposit rate to be raised to 2% at the next meeting in mid-December, and to approach 3% in the course of next year even if the very strong uncertainties economic and financial can strongly influence the evolution of monetary policy.
Now close to 10%, inflation in the euro zone is nearly five times higher than the target set by the ECB. The Board of Governors also announced a change in the terms of TLTROs, operations which enabled financial institutions to refinance themselves at zero or even negative rates when the priority of monetary policy was to support credit, and which now ensure significant remuneration today.
Christine Lagarde will explain herself this Thursday
At the same time, the ECB will continue to reinvest the repayments of maturing securities that have been acquired under its APP (Asset Purchase Programme) over the past eight years. On the financial markets, the yield on ten-year German government bonds, a benchmark for the whole of the euro zone, fell following these announcements and fell to 2.089% a few minutes following the publication of the press release, once morest more than 2.18% just before.
At the same time, the euro lost 0.65% once morest the dollar at 1.0012 once morest 1.005 before the announcements by the Board of Governors. And on the equity side, the EuroStoxx 50 index lost 0.17%. The president of the institution, Christine Lagarde, must comment on these decisions during a press conference on Thursday.
