The European Central Bank (ECB) followed a different path from the Federal Reserve, raising the interest rate by 0.5 percentage point. The ECB stated that it will implement a similar increase in March. This is because strong economic growth in the euro area and the rapid reopening of the Chinese economy are expected to keep inflation high.
ECB Increases Rates for the Fifth Time!
Koinfinans.com As we have reported, the European Central Bank continues to increase interest rates to combat high inflation in the Eurozone. This came after a number of factors, including Covid-19 and the energy crisis that followed the invasion of Ukraine.
With this move, the ECB raised the benchmark interest rate to 2.5%, the highest level since 2008. That rate is still far behind the rates set by the Fed, which increased it to 4.50% from 4.75% Wednesday, and the Bank of England, which increased it to 4% earlier on Thursday.
In its statement, the ECB underlined that it will continue to raise interest rates. As a result, it means that the ECB will implement a stronger increase than the Fed and the BoE.
Inflation Concern Continues
Inflation in the euro area fell to 8.5% last month from a record 10.6% in October, which was above the 6.5% inflation rate recorded in December in the United States. Low gas storage levels and a warm European winter contributed to lower energy costs in Europe, while the price of imported goods, particularly energy, fell as global supply constraints eased and the euro rose from less than $1 to about $1.10 over the past three months.
On the other hand, the British Monetary Policy Committee, by 2 votes to 7, raised the main bank rate by half a point to 4%. However, the committee hinted in its resolution statement that smaller rate increases could be seen at future meetings.