The European Central Bank (ECB) announced its latest monetary policy decisions on Thursday afternoon (2:15 p.m.). Another rate hike of 0.5 points is considered very likely. Since July 2022, the monetary authorities have raised interest rates five times in a row in the fight against high inflation, and the key interest rate in the euro area is now 3.0 percent. Higher interest rates make borrowing more expensive, which can curb demand and counteract high inflation.
In the medium term, the ECB is aiming for price stability in the euro area with an inflation rate of two percent. That target has been miles away for months. In February, the inflation rate in the common currency area was 8.5 percent according to an initial estimate by the European statistics office Eurostat. Higher inflation rates reduce the purchasing power of consumers, they can afford less for one euro.
There have recently been signs of further interest rate hikes beyond March. “At this point in time, it is possible that we will continue on this path,” said ECB President Christine Lagarde recently on Spanish television. However, nothing can yet be said about the size of the conceivable rate hikes.
According to economists, further steps are likely to depend largely on the ECB’s forecasts for inflation and economic development, which were also presented on Thursday. The collapse of the Silicon Valley Bank and the problems of other credit institutions in the USA, which at times sent shockwaves through the financial markets, should also concern the ECB Council at its meeting on Thursday.