The European Central Bank raised interest rates on Thursday to the highest level since 2008, maintaining a strong policy even as overall eurozone inflation appears to have peaked. percentage points, raising the benchmark deposit rate to 2.5 percent.
The ECB said in a statement it would “maintain a path of substantial rate hikes at a steady pace” and indicated that further hikes, including another half-point hike in May, can be expected. Father.
“Keeping interest rates limited over time will reduce inflation by dampening demand and will also protect against the risk of persistently fluctuating inflation expectations,” the bank said in a statement. .
Europeans face tight financial conditions as the war in Ukraine continues into its second year, but the region has surprisingly resilient to recent economic uncertainties. Data released on Tuesday showed eurozone countries averted a recession late last year, and other economic indicators showed a brighter outlook than expected just months ago. This is largely due to the fact that natural gas prices have fallen from their peaks. in August.
However, significant risks remain, especially from persistent inflationary pressures. A recession could be avoided this year, but the euro area is likely to experience a severe recession as the effects of higher interest rates limit the economy and inflation eats away at banks. household book.
On Wednesday, the data showed that annual inflation rate in the euro area fell to 8.5% in January, from 9.2% the previous month. Data showed inflation peaked in October, at 10.6%, but policymakers emphasized that the fight against high inflation in the region was fruitless.
In several countries, including France and Spain, inflation rates rose in January. core inflation, a measure closely watched by policymakers as it shows how deeply ingrained price increases have become in the economy, remaining stubbornly high. In January, the annual core inflation rate, excluding food and energy prices, was 5.2%, the same as the previous month.
The ECB’s action comes almost an hour after Bank of England raised the benchmark rate by half a point, to 4% – the highest level since October 2008. On Wednesday, US Federal Reserve raised interest rates by a quarter point, to a range of 4.5 to 4.75 percent. It was the Fed’s eighth increase in a year but the smallest since March, when officials said inflation had finally begun to ease meaningfully and the global economy was in little danger. more than last year.
