ECB Raises Interest Rates to Combat Stubborn Inflation

September 15, 2023

The marginal lending facility, which offers overnight credit to banks, was also increased by a quarter-point to 4.75 per cent…reports Asian Lite News

The European Central Bank (ECB) has raised interest rates to the highest level since the launch of the euro to tackle stubbornly high inflation, despite fears over a slowdown across the single currency bloc, according to a media report.

It marks the 10th consecutive rate rise for the bank, as the ECB warned inflation remained too high even as the impact of previous increases and a weakening outlook for global trade weigh on the eurozone economy, The Guardian reported. 

The latest increase pushes the ECB’s deposit rate, which is paid on commercial bank deposits, from 3.75 per cent to 4 per cent — the highest since the euro was launched in 1999. Its main refinancing operations, which provide the bulk of liquidity to the banking system, was increased from 4.25 per cent to 4.5 per cent, The Guardian reported.

The marginal lending facility, which offers overnight credit to banks, was also increased by a quarter-point to 4.75 per cent.

The decision comes as global investors predict the world’s most powerful central banks are close to the end of the most aggressive rate-hiking cycle in decades after inflation surged after the Covid pandemic and the Russian invasion of Ukraine, The Guardian reported.

The decision comes as global investors predict the world’s most powerful central banks are close to the end of the most aggressive rate-hiking cycle in decades after inflation surged after the Covid pandemic and the Russian invasion of Ukraine.

Economists anticipate one further increase from the Bank of England when its policymakers meet next week, and expect the US Federal Reserve to leave borrowing costs unchanged despite an uptick in inflation last month driven by higher energy costs, The Guardian reported.

ALSO READ-ECB raises key rates by 25 bps

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