During their meeting in Frankfurt on Thursday, the 14th of September, the Council of the European Central Bank (ECB) decided to increase interest rates once again. This makes it the tenth consecutive meeting at which ECB has increased interest rates.
The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 4.50%, 4.75% and 4.00% respectively. All three will be increased by 0.25 percentage points.
The new rates will come into effect on the 20th of September.
After the publication of the announcement the Council of ECB noted that “the rate increase today reflects the Governing Council’s assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission.”
ECB adds: “The Governing Council’s past interest rate increases continue to be transmitted forcefully. Financing conditions have tightened further and are increasingly dampening demand, which is an important factor in bringing inflation back to target.”
Based on the existing outlook, the council believes the main interest rates have reached levels which, if maintained for a sufficient period of time, will make a significant contribution to the timely return of inflation to its target levels.
“The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary. The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction. In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission,” ECB’s announcement mentions.
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