FRANKFURT — The European Central Bank raised interest rates by more than expected on Thursday as concerns about runaway inflation trumped worries about growth, even while the euro zone economy is suffering from the impact of Russia’s war in Ukraine.
Ending an eight-year experiment with negative interest rates, the ECB also lifted its main refinancing rate to 0.50%, and promised another hike, possibly as soon as its Sept. 8 meeting, with more to follow later. “We decided on balance that it was appropriate to take a larger step towards exiting from negative interest rates.”
The ECB had for weeks guided markets to expect a 25-basis-point increase on Thursday, but sources close to the discussion told Reuters early this week that 50 basis points had come into play as part of a deal including help for indebted countries. Economists polled by Reuters had predicted a 25-basis-point increase but most favored a 50-basis-point hike, lifting the ECB’s record-low minus 0.5% deposit rate to zero.
Recent increases have been larger for indebted countries like Italy, Spain and Portugal but sources told Reuters the ECB was not seeing the need to activate the new scheme in any country at present.
Source: Financial Digest (financialdigest.net)
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