European Central Bank raises interest rates for the first time in more than a decade

The European Central Bank (BQE) has increased interest rates by half a percentage point. This is its first growth for more than a decade. The Bank pledged to prevent increased borrowing costs, following fears of a Eurozone debt crisis, which increased after political unrest in Italy.

The ECB said in a press release following its Steering Council meeting in Frankfurt that “gjko said it was appropriate to take a larger first step on the road to normalising the policy rate, rather than signaling to the previous collection” due to higher inflation than expected and supporting the new draft purchase of bonds. The central bank had said last month it would raise rates by a quarter point.

According to the announcement: “The Steering Council decided to raise the ECB's three main interest rates by 50 basic points. Consequently, the interest rate for major refinance operations and interest rates for margin credit and deposit mechanisation will increase to 0.50%, 0.75% and 0.00% respectively, with an effect from July 27th 2022.

The euro earned more than 0.5 percent against the dollar by rising to over $1.02. Concerns about global growth and inflation caused the European currency to go towards drawing the dollar last week.

Germany's 10-year-old Bend, an indicator for borrowing costs across the eurozone, rose significantly after the announcement, extending by 0.1 percentage points. The rise in the rate and break-up of Mario Draghi's national unity coalition caused Italy's 10-year bond to rise by 0.24 percentage points early Thursday, reaching 3.6 percent.

The ECB Steering Council said it would record the quiet transmission of the monetary policy stance” under a new programme designed to take on any growth of individual countries' bonds across the standard justified by economic bases.

Christine Lagarde, president of the ECB, said the size of duty purchases under the programme was not a limited “ex-ante “and that it would activate “to counter unjustified dynamics that pose a serious threat to the transmission of monetary policy throughout the euro area”.

The central bank said the rates would be further raised at future meetings, adding: today's “Wall of exit from negative interest rates allows the board to make a transition to the approach to the interest rate decisions after each meeting”.

The move is the first step in changing the extremely easy monetary policy in the ECB for a decade during which a negative rate of deposit was held and nearly 5 trillion euros were purchased to support the economy over the past eight years. The bank is tightening policy in an effort to curb record Eurozone inflation, which reached 8.6 per cent in June.

There are fears that high interest rates will lead the eurozone into recession. The bloc has already been hit by increased energy and food prices after the Russian invasion of Ukraine, a slowdown in business activity and a decline in consumer confidence at record levels. Monitor

European Central Bank raises interest rates for the first time in more than a decade