The central bank must curb inflation in the euro zone.
(Photo: dpa)
Frankfurt, Dusseldorf The European Central Bank (ECB) continues to raise interest rates in the euro area. It raises the key interest rate by 0.75 percentage points to two percent. The currently even more important interest rate that banks receive for their deposits at the ECB will rise from 0.75 to 1.5 percent. The central bank announced this on Thursday afternoon.
The ECB had already raised interest rates by the same amount in September. This is the largest increase in the history of the central bank, apart from a technical adjustment in the weeks immediately after the start of monetary union. The rate hike is therefore as expected. The markets had increasingly priced this in over the past few weeks.
With its decisions, the ECB is reacting to the further increase in inflation in the euro area, which rose to a record high of 9.9 percent in September. The central bank is actually aiming for a value of two percent. “Inflation is still far too high and will remain above target for a long time,” stressed the ECB.
In addition, the ECB decided on changes for banks in the long-term loans TLTRO III. The interest rates for these loans will be adjusted from November 23, 2022 and the banks will be given additional repayment options. In addition, the remuneration of the minimum reserves will be adjusted to the level of the deposit rate. Further details are to be announced in the afternoon.
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From 2:45 p.m., ECB President Christine Lagarde will give a press conference on the new decisions. You can follow them in our news blog.
In the run-up, several ECB council representatives had spoken out in favor of a further significant tightening of monetary policy. The heads of the central banks in the Netherlands and Latvia called for two more sharp interest rate hikes. Bundesbank President Joachim Nagel also recently spoke out in favor of a robust interest rate hike, without naming a specific figure on the strength of the step.
The proponents of strong interest rate hikes refer above all to the high inflation in the euro area. What was striking in September was the rise in core inflation, which excludes food and energy prices that are particularly susceptible to volatility. It rose from 4.3 to 4.8 percent. Apparently, the higher oil and gas prices are increasingly affecting the prices of other energy-intensive goods.
Inflation: new data on Friday and Monday
On Friday, the Federal Statistical Office will publish new figures on inflation in Germany in October. Economists expect the inflation rate to rise again from 10.0 to 10.1 percent. The figures for the entire euro area will follow on Monday.
The US bank Goldman Sachs expects inflation there to peak in January at 11.7 percent. A lot depends on politics. In Germany, the federal government has announced price brakes for electricity and gas. In its forecast, Goldman Sachs assumes that the gas price brake will be introduced in March 2023. An earlier start date is also under discussion.
How inflation will continue in the coming months is particularly important for the question of how far the ECB will raise interest rates. Goldman Sachs expects the deposit rate to peak in March 2023 at 2.75 percent. She expects further increases in December and February by half a percentage point each and in March by a quarter of a percentage point. The US bank Morgan Stanley expects a level of 2.5 percent for the deposit rate in the euro area for March.
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