The European Central Bank raised interest rates by half a percentage point on Thursday, in a sign of its concern that inflation will remain high despite the recent fall in energy prices.
The widely expected increase took the ECB’s benchmark deposit rate to 2.5 per cent, its highest level since the global financial crisis. The central bank has now increased borrowing costs by a full 3 percentage points since it began raising rates in July.
The ECB’s move followed a half-point increase by the Bank of England and a quarter-point rise on Wednesday by the US Federal Reserve.
The Fed has slowed the pace of tightening on signs that some price pressures in the US are now dissipating, with chair Jay Powell offering hope this week that inflation could return to the central bank’s 2 per cent target without “a really significant economic decline”.
But the ECB signalled its resolve to press on with aggressive tightening, saying in its statement it would “stay the course” and intended to raise interest rates by another 50 basis points at its next monetary policy meeting in March, after which it would “evaluate the subsequent path of its monetary policy”.
