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27 Oct, 2022 12:11

Eurozone sees highest interest rates in decade

The European Central Bank has introduced another 75 basis-point hike to curb inflation, despite recession fears
Eurozone sees highest interest rates in decade

The European Central Bank (ECB) doubled its benchmark interest rates on Thursday, according to data published on the regulator’s website.

The ECB opted for a second straight 75 basis-point hike, which will take effect next Wednesday, November 2.

The interest rate on the main refinancing operations was lifted to 2.00%, the rate on the deposit facility was fixed at 1.50%, and the rate on the marginal lending facility was set at 2.25%. According to the regulator’s data, the same level of interest rates was last seen more than ten years ago. The previous increase of a similar scale was made in September.

The ECB has been trying to bring under control an inflation rate that currently stands at around 10%, which is five times higher than its target level.

The interest rate influences costs for consumers and businesses. Higher rates mean less borrowing and lower consumption, thus cooling price growth. However, the resulting slower economic activity could lead to a recession, which is what many economists have predicted will happen in the EU at the end of this year and early next year.

Some EU leaders such as newly elected Italian Prime Minister Giorgia Meloni and French President Emmanuel Macron have spoken out against interest rate hikes.

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