Read why European Central Bank fears recession
The European Central Bank increased rates by 0.25 percentage points to get inflation down.
The European Central Bank has been advised to abide by interest rate rises amid rising recession fears after raising them by 0.25 percentage points to a joint record high.
European Central Bank fears recession after high-interest rates:
Analysts mentioned problems that European property costs have declined as reasons for the central bank to freeze the cost of borrowing on its three fundamental interest rates.
The latest increase forces the ECB’s deposit rate, paid on commercial bank deposits left overnight with the central bank, to 3.75%, matching the last record set in 2000-01.
The ECB president, Christine Lagarde, opened the door for further rate increases after she said the governing council would be “data dependent” regarding its next steps.
Speaking in Frankfurt after the US Federal Reserve lifted interest rates by 0.25 percentage points, Lagarde stated the ECB would hold interest rates at “sufficiently restrictive levels for as long as necessary” to get inflation down to its 2% mark.
She stated: “We want to break the back of inflation and will get there, come what may.”
Its primary refinancing operations, the rate banks spend when borrowing funds from the ECB, grew to 4.25% – the highest in nearly two decades.
Eurozone inflation dropped from 10.6% last year to 5.5% in June, though the price increase varies from 1.9% in Spain to 9.7% in the Czech Republic. German inflation was 6.7% in June, encouraged by a 13.4% rise in the cost of food.
According to the ECB, the perspective for economic development and inflation in the eurozone remains to be determined.
