ECB Negative Deposit Rate Ended
July 21, 2022
The European Central Bank’s three key interest rates were raised by 50 basis points, not the 25 bps that it was expecting to go when the previous policy meeting was held in early June. The new rate configuration is a 0.50% refinancing rate, flanked by a zero percent deposit rate and a 0.75% marginal lending rate. Today’s interest rate increases are the first hike in 11 years, but officials did not take the additional step of ending their policy of reinvesting the principal of maturing securities that it acquired during previous quantitative tightening. Inflation has climbed to a record 8.6% and is still cresting. According to the rate announcement,
Further normalization of interest rates will be appropriate. The front-loading today of the exit from negative interest rates allows the Governing Council to make a transition to a meeting-by-meeting approach to interest rate decisions. The Governing Council’s future policy rate path will continue to be data-dependent and will help to deliver on its 2% inflation target over the medium term.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: European Central Bank
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