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ECB raises interest rates by 25 basis points to record level

Published Sep 14, 2023 08:10AM ET
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Investing.com -- The European Central Bank has hiked interest rates to a record high as policymakers look to address elevated inflation in the eurozone despite signals that the region's economy is weakening.

It is the tenth straight rate increase by the Frankfurt-based bank since it was widely seen to have misjudged the speed of price gains early last year. The move brings the ECB's main refinancing operations, the interest rates on the marginal lending facility and the deposit facility up to 4.50%, 4.75% and 4.00%, respectively.

"Inflation continues to decline but is still expected to remain too high for too long," the ECB said in a statement, reiterating its goal of returning price growth to its 2% medium-term objective in a timely manner. "The rate increase today reflects the Governing Council’s assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission."

But the ECB seemed to suggest that this will likely be its final hike for some time, noting that rates have now reached levels that "maintained for a sufficiently long duration, will make a substantial contribution" to cooling inflation.

Prior to the decision, debate swirled around how officials would adjust borrowing costs to account for stubbornly high price growth and flagging economic activity.

Preliminary readings showed that inflation in the eurozone is now more than twice the ECB's 2% target. However, the bank's long-standing monetary tightening campaign, coupled with similar policy shifts by central banks across the world and weakness in China, have begun to hit the broader eurozone economy. Manufacturing is suffering, while lending has slumped and services have showed early signs of strain, contributing to concerns that the region may slip into a recession.

"The fear of not getting inflation fully under control and the risk of stopping too early must have been a larger concern than the rising recession risk in the eurozone," said analysts at ING, in a note.

 

ECB raises interest rates by 25 basis points to record level
 

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Comments (6)
Ian Just
Ian Just Sep 14, 2023 11:12AM ET
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.....and the recession will deepen
Tre Hsi
Tre Hsi Sep 14, 2023 9:53AM ET
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I blame Biden (both Joe and Hunter), while we are at it, clearly the earthquake in Morocco and the flooding in Libya are also their fault....
Jurgen Daub
Jurgen Daub Sep 14, 2023 9:53AM ET
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adding global warming, abortion ban, and that the earth is not flat, the fall of the roman empire etc, all his and the democrates fault
Maria Kenny
Maria Kenny Sep 14, 2023 9:43AM ET
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relief rally
Maria Kenny
Maria Kenny Sep 14, 2023 9:42AM ET
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abankers were expecting a pause by EU and put money into the eurozone. So they have to bring the index up to get their money out at a profit. Unless the EU indicated a Pause and this is the relief rally.
bert prince
bert prince Sep 14, 2023 9:23AM ET
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rates down in eurozone
Adam Václavík
Adam Václavík Sep 14, 2023 8:28AM ET
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so why are indices up?!
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Blair Clements
Blair Clements Sep 14, 2023 8:28AM ET
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raising interest rates to stem the tide of tsunami debt-wave ain't gonna work. time to batten down the hatches before year-end. global markets have been consolidating since June. the wave has already caught china.
David Matulin
David Matulin Sep 14, 2023 8:28AM ET
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Contageral Geral Everything is a trap, governments and central banks created this mess. This is now centrally planned economy, nothing (of market forces) really matters as you can't predict what will aforementioned do next. Hint: they can't wait to start flooding market with cheap loans and fiscal stimulus. It's election year in EU ... they need a lot of carrot for suckers
soho electronics
soho electronics Sep 14, 2023 8:28AM ET
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FTSE hitting all time highs yet the UK economy in shambles!
David Matulin
David Matulin Sep 14, 2023 8:28AM ET
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Easy, it's inflation... reserves of free money still flowing to financial instruments. It could all come crashing down anytime.
Maria Kenny
Maria Kenny Sep 14, 2023 8:28AM ET
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bankers were expecting an EU pause and put money in. they will buff it up for a profit and get out.
 
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