Fight against inflation – ECB raises policy rate to 4.0 percent

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In the fight against the persistently high inflation, the monetary watchdogs announced the eighth interest rate increase in a row on Thursday. The Governing Council of the European Central Bank (ECB) has decided to raise key interest rates in the euro area by a further 0.25 percentage point to 4.0 percent.

If banks park money at the ECB, they will receive 3.50 percent interest in the future, the central bank in Frankfurt announced. Since July 2022, the ECB has hiked interest rates in an unprecedented series in the face of persistently high inflation. After several 0.50 point increases, the central bank recently slowed somewhat. The monetary watchdogs also raised the policy rate by 0.25 percentage point in May.

Loans become more expensive
Higher interest rates make loans more expensive. This can slow down demand and counter high inflation rates. Inflation eased in May. According to an initial estimate by the Eurostat statistics agency, consumer prices in the currency area of ​​the 20 countries were 6.1 percent above the level of the same month last year.

An annual inflation rate of 7.0 percent was recorded in April. However, the rate is still well above the ECB’s medium-term inflation target of 2 percent, with the central bank maintaining price stability.

Source: Krone

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