Caught up by inflation records, the European Central Bank (ECB) on Thursday accelerated the tightening of its monetary policy by deciding to raise its interest rates on an unprecedented scale.
The Monetary Institute’s Board of Governors has decided to raise key rates by 75 basis points, a first in two decades of existence – apart from a technical adjustment in 1999.
Serving as a reference in a context of abundant liquidity, the rate on bank deposits at the ECB, reduced from -0.5% to 0% in July, thus rose to 0.75%.
The other two key rates, the one applied to banks on refinancing operations over several weeks and the one targeting the day-to-day marginal lending facility, go to 1.25% and 1.50% respectively.
Rate hikes should encourage savings and reduce consumption, to reduce pressure on prices.
In July, the ECB had a firm hand by announcing a surprise increase of 50 basis points, when 25 points were expected.
This first rise in more than a decade came following a long period of cheap money helping to stimulate the economy.
The promise was then to do the same in September unless inflationary pressures ebb.
