75-Basis Point ECB Rate Hike
September 8, 2022
An initial 50-basis point interest rate hike at the European Central Bank in July has been followed by a 75-bp hike at this month’s scheduled meeting. The three interest rates now included a 1.25% refinancing rate flanked by a 0.75% deposit rate and a 1.50% marginal lending facility rate. Prior to July, there had not been a change in rates since a 10-basis point reduction of the deposit rate to -0.50% in September 2019. In enacting their largest rate hike ever, the ECB Governing Council revised projected inflation upward and projected growth downward. CPI inflation is expected to average 8.1% this year, 5.5% next year and 2.3% in 2024, and the GDP growth forecast for 2023 was more than halved to just 0.9%. Consumer price inflation over the past year accelerated from 3.0% in August 2021 to 9.1% last month. More interest rate hikes will follow at upcoming meetings, and today’s increases today were made
because inflation remains far too high and is likely to stay above our target for an extended period. This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will support a timely return of inflation to our two per cent medium-term target.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: European Central Bank
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