This increase raises the European Central Bank’s deposit rate to 3.25 percent, its highest level since 2008.
The European Central Bank announced Thursday that it will raise interest rates slightly in response to the rising cost of lending, but said that inflation expectations remain “high for a prolonged period.”
This is the seventh consecutive increase in interest rates as part of the bank’s unprecedented campaign to tighten monetary measures that began last year with the rise in the prices of everyday commodities.
However, the bank’s 26-member board of governors decided to reduce the increase to a quarter of a percentage point, compared to half a percentage point in previous times.
While the price hike remained 2 percentage points above the Bank’s target, the closely watched underlying inflation, excluding volatile energy and food commodities, may be on the wane as the repercussions of the hike begin to emerge.
In its statement, the ECB did not mention any commitment to further rate hikes, but said it will continue to take a “data-driven approach” and is not believed to be in the final stages of making such decisions.
“Inflation expectations remain high for a prolonged period,” he said in the statement.
“Future decisions will ensure that policy rates are raised to sufficiently restrictive levels to achieve a timely return of inflation to the medium-term target of 3 percent, and they will remain at these levels as long as necessary,” he added.
This increase raises the interest rate on deposits of the European Central Bank to 3.25 percent, the highest level since 2008.
The European Central Bank’s decision came a day after the US Federal Reserve announced its tenth consecutive increase and raised borrowing costs by a quarter of a point, and hinted that it might temporarily stop additional increases.
However, US stocks closed lower after Federal Reserve Chairman Jerome Powell ruled out cutting interest rates in 2023.
Inflation in the 20-country eurozone began rising last year after Russia invaded Ukraine and cut gas shipments to Europe, leading to an energy crisis.