The European Central Bank (ECB) decided this Thursday to raise interest rates by half a point, up to 2.5%, its highest level since December 2008, and plans to “continue increasing them” to contain inflation.
After the Governing Council meeting, the ECB reported in a statement that it would also increases the credit facility by 50 basis pointswhich lends to banks overnight, up to 2.75%, and the deposit facility, which remunerates excess reserves overnight, up to 2%.
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“The Governing Council estimates that interest rates will still have to be increased significantly at a sustained pace until they reach sufficiently restrictive levels to ensure that they return to the 2% objective in a timely manner in the medium term,” the statement said.
According to the ECB, keeping interest rates at restrictive levels will reduce inflation by moderating demand and it will also serve as protection once morest the risk of a persistent upward shift in inflation expectations.
He stressed that future Governing Council decisions on official interest rates will continue to be data driven and will follow a decision-making approach at each meeting.
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This is the fourth consecutive rise in rates undertaken by the ECB, following those of July, September and October, with which the ECB intends to contain inflation in the euro area, which in November fell for the first time in 17 months to 10%following in October it marked a maximum in October at 10.6%.
Core inflation, however, remained unchanged at 5% year-on-year.
The ECB, in its last monetary policy meeting of the year, thus meets market expectations and lifts its foot off the accelerator following the last two rate hikes, which were 75 basis points.
