Despite the recent turbulence in the banking sector, the European Central Bank (ECB) today implemented its announced interest rate hike unchanged. In the fight against high inflation, she raised the key interest rate, at which commercial banks can borrow money from her, by 0.5 points to 3.5 percent. The ECB described the banking sector in the euro area as “resilient” – it also has “all monetary policy instruments” to support the euro financial system if necessary.
The ECB also increased the other two interest rates by 0.5 points to 3.75 percent and 3.0 percent respectively. These are the interest rates for the marginal lending facility for short-term procurement of money and for the deposit facility when banks deposit their money with the ECB.
ECB boss wants to “monitor tensions”
Higher interest rates are seen as anti-inflationary remedies, but they also act as a brake on economic growth. Since high interest rates have also contributed to the difficulties faced by US banks in recent days, the ECB’s decision was a difficult undertaking. With its decision, the central bank is now orienting itself towards the announcements it had made before about increasing interest rates.
At the same time, ECB President Christine Lagarde assured that the “current market tensions” would be closely monitored. The ECB is also ready to react “as necessary to maintain price and financial stability in the euro area”. Most recently, the closure of two troubled US banks had worried the industry.
Nevertheless, the ECB is primarily committed to fighting inflation – according to the projections, this will remain “too high for too long”, it said in justification. In February, inflation in the euro area was 8.5 percent year-on-year. The ECB is actually aiming for a value of around two percent.
