The European Central Bank raises interest rates in the eurozone by 75 basis points. It’s the biggest increase ever – interest rates

The European Central Bank (ECB) decided to increase the benchmark interest rates in the Eurozone for the second time in a row. The monetary authority led by Christine Lagarde announced a historic increase of 75 basis points in the three rates, in line with market expectations.

“This major step anticipates a transition from the prevailing level of ultra-accommodative interest rate policy to levels that will ensure a timely return of inflation to the ECB’s medium-term 2% target,” the statement following Thursday’s advice explains.

From September 14, the interest rate applicable to major refinancing operations will increase to 1.25%, while the rate applicable to the marginal lending facility will increase to 1.5% and to deposits to 0.75%.

At the last meeting, at the end of July, they had already increased by 50 basis points each. Despite this, the latest data showed that inflation in the eurozone continues to accelerate: it reached 9.1% in August, compared to 8.9% in July. This path will justify the new rate hike, and analysts predict that the European Central Bank will not stop there.

“Based on the current assessment, the Governing Council expects in upcoming meetings to increase interest rates further to reduce demand and protect the risks of a continuing upward shift in inflation expectations,” says the ECB, explaining that policy makers will “re-evaluate” the course of monetary policy in light of Information received and the evolution of inflation expectations.

For the debt purchase programme, the ECB ensures that it will continue to fully reinvest amounts up to maturity under the Regular Program (APP) “for an extended period of time” and “as long as necessary to maintain ample liquidity”.

As far as the pandemic program is concerned, Pakistan’s Environmental Protection Plan plans to reinvest the principal payments until at least the end of 2024. ‘, he adds. ‘The reinvestment of the PEPP portfolio is flexibly reinvested with the aim of balancing the risks associated with the pandemic in the monetary policy transmission mechanism.’

(news updated at 1:40 pm)