The European Central Bank (ECB) raised its interest rate rate by 0.25 percentage points (p) as expected. It is the ninth consecutive increase. However, leaving options open on whether to raise interest rates further in September, suggesting that the ECB has reached the end of austerity.
According to Reuters and other foreign media on the 27th (local time), the ECB raised its benchmark interest rate by 0.25%p from 4% to 4.25% after a regular monetary policy meeting. The receiving rate also increased by 0.25%p from 3.5% to 3.75% and the marginal loan rate from 4.25% to 4.5%.
As a result, the ECB has raised interest rates for the ninth consecutive time since it began tightening in July last year. The result is in line with market expectations that it will raise interest rates by 0.25%p again this time to curb inflation.
Eurozone inflation hit double digits last year and slowed to 5.5% last month, but is still more than double the ECB’s 2% target.
However, at the meeting, the ECB did not provide a clear clue as to whether it would raise further interest rate in September, when the next meeting will be held. As the eurozone economy is deteriorating due to a sharp rate hike, it is interpreted as an intention to wait and see if further hikes are needed.
Recently, a series of indicators have been released in Europe that demand for corporate loans is plummeting and economic activity is shrinking. The International Monetary Fund (IMF) predicted that the eurozone economy would grow only 0.9% this year, while Germany, the largest economy in the eurozone, expected a 0.3% economic contraction.
Reuters predicted that as it is clear that the ECB’s rate hike is nearing its end, discussions on how long interest rates will remain at the current level will also become active.
