ECB raises interest rates by 0.50% as expected

As expected, the European Central Bank (ECB) raised interest rates by 0.50% yesterday. This brought the key interest rate to 2.50%, the highest level since November 2008, while deposit and lending rates were 2.0% and 2.75%, respectively. The ECB also announced further interest rate hikes to curb inflation.

“The ECB board has decided to raise interest rates and is expected to do so significantly. Because inflation is still too high, and is expected to stay above the target level for too long,” the statement said.

The ECB raised interest rates for the fourth consecutive month, having raised them by 0.50% in July and by 0.75% in both September and October. The July rate hike was the first increase in 11 years and the largest since 2000.

At the same time, the ECB announced that it would start reducing its balance sheet by €15 billion per month from March 2023 until the end of the second quarter of this year.

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