The European Central Bank (ECB) raised its key rate by 50 basis points to 0.5% per annum for the first time since 2011. This is stated in the release of a single European regulator.
“Today, in line with our firm commitment to returning inflation to the 2% target, we have decided to raise three key rates by 50 basis points,” the ECB said in a statement. Many analysts did not expect such a sharp increase from the ECB, expecting the level of 0.25%. The regulator explained the sharp increase in the rate by increased inflationary expectations, which the regulator has to take into account.
The current rate increase (by 50 basis points at once) has become a record since 2000. The single European regulator has entered the phase of raising rates one of the last among the central banks of developed countries. For example, the US Federal Reserve (Fed) has already raised rates twice in 2022 to reduce inflationary pressures. However, so far the actions of the world Central Banks are not enough, and the inflation rate is at its maximum over the past 40 years.
Loose monetary policy and uncertain ECB rhetoric significantly undermined the euro, which at a minimum fell even below parity with the US dollar, which happened for the first time in 20 years. The tightening of credit policy is expected to help the European currency win back its positions.
