Introduction

The European Central Bank (ECB) announced on Thursday that it has increased interest rates by 25 basis points to 4.5 percent. This marks the 10th hike in interest rates since last year.

Record-breaking Interest Rate Hikes

The series of interest rate hikes carried out by the ECB has been unprecedented. It has raised the central bank’s deposit capacity from -0.5% in June 2022 to a record 4%.

Reasons for the Rise

The primary driver behind this increase seems to be an upward revision to the recently published macroeconomic forecasts for the eurozone. These forecasts predict an average inflation rate of 5.6% for this year, 3.2% for next year (2024), and 2.1% for 2025.

Inflation Numbers

Data from the Statistical Office of the European Union (Eurostat) revealed that headline inflation in the twenty countries using the euro remained unchanged at 5.3 percent in August. This figure missed expectations of a decline to 5.1 percent. The current ratio is still far from the ECB’s target of 2%.

ECB’s Stance and Speculations

ECB President Christine Lagarde stated in a recent speech that the battle against inflation is “not yet won.” However, some experts believed that the central bank would delay further interest rate hikes until October due to worsening economic indicators, particularly in Germany.

Source

Source: CNBC