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14 Sep, 2023 15:11

Eurozone interest rates hit record high

The tenth hike in a row comes amid expectations of higher consumer prices through the rest of the year and beyond
Eurozone interest rates hit record high

The European Central Bank (ECB) has announced a tenth consecutive hike in its key interest rate, potentially marking the final step in a series of efforts aimed at bringing inflation back to target.

EU policymakers raised rates by another quarter percentage point on Thursday, taking the closely watched benchmark to 4%, the highest level since the introduction of the euro in 1999.

The rate stood at a record low of minus 0.5% just 14 months ago, meaning that banks from across the Eurozone had to pay to park their cash securely at the regulator.

The latest hike came shortly after an ECB report revised macroeconomic forecasts for the euro area upwards, envisaging average inflation of 5.6% in 2023 from a prior projection of 5.4%, and of 3.2% next year compared to previous expectations of 3%.

At the same time, the report nudged its medium-term forecast lower, from 2.2% to 2.1%.

“Inflation continues to decline but is still expected to remain too high for too long,” the regulator said in a statement. “The governing council is determined to ensure that inflation returns to its two percent medium-term target in a timely manner.”

The EU has been struggling to combat red-hot inflation across the bloc, driven by runaway energy prices. The ECB began its most aggressive rate-hiking cycle on record in July 2022, after sanctions imposed on Moscow sent gas prices skyrocketing and undermined most of the trade between Russia and the bloc.

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