The European Central Bank announces decision on interest rates

The European Central Bank (ECB) announced its highly anticipated decision on worldwide interest rates. In line with expectations, the bank raised the policy rate by 50 basis points.

The bank had raised interest rates by 75 basis points last month. Thus, the ECB halted the rise in rates after the intervention of the US Federal Reserve (Fed).

The ECB increased the main refinancing rate to 2.5 percent, the marginal lending facility to 2.75 percent, and the deposit rate to 2 percent, with the decision to increase the interest rate. Thus, the interest rate rose to the highest level since 2008.

In the statement issued by the bank, it was indicated that the monetary adjustment will start in March as planned and will be carried out at a predictable pace. The statement also emphasized the fight against inflation.

Following the decision, the euro/dollar parity traded at 1.0646. Euro/TL rose to 19.85.

THE ECB CONTINUES RAISING ITS INTEREST

The ECB raised interest rates by 75 basis points for the first time in its history on September 8 and raised interest rates by 75 basis points in two consecutive meetings. Thus, in the last 4 meetings, a total of 250 base points of increase in interest rates was reached.

Consumer inflation in the euro zone, which was in the grip of an energy crisis, fell to 10 percent in November.

LAGARDE HIGHLIGHTS ON INFLATION TARGETS

Following the decision, ECB President Christine Lagarde appeared before the cameras. Stating that inflation remained high for longer than the target, Ella Lagarde said: “We expect growth to pick up as negative fluctuations fade.” Here are the highlights of Lagarde’s speech:

“The deterioration in trade is causing prices to rise rapidly and is causing some energy problems in Europe. High inflation and tight financing conditions reduce spending.

Tight monetary policy may reinforce downside risks. We believe that interest rates should rise sharply. We expect inflation to rise to 2 percent by tightening its belt. Our goal is to reduce inflation by reducing demand with a tight monetary policy.

High inflation and tight financing conditions slow spending and output, as well as global growth. We have to wait a while for increases of 50 basis points.

The depreciation of the euro further increased inflation.