Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

European Bank Raises Interest Rates by 0.5% to Control Inflation

Thu 16 Mar 2023 | 07:15 PM

The European Central Bank pushed ahead with a half-point increase in interest rates on Thursday, sticking to its previously stated plan, but said the recent turmoil in financial markets had made the path ahead much less certain.

The central bank said in a statement that its policymakers were “monitoring current market tensions closely” and the bank “stands ready to respond as necessary to preserve price stability and financial stability in the euro area.”

For the past few months, the central bank has been lighting the way ahead for investors, committing to its next interest rate move in advance. But on Thursday, the bank was less clear about the next step as it determines the impact of past tightening on the economy and inflation.

“The elevated level of uncertainty reinforces the importance of a data-dependent approach” to policy decisions, the statement said.

The bank raised its deposit rate to 3 percent, the highest since October 2008.

“Inflation is projected to remain too high for too long,” the bank said, adding that the move was needed to ensure the “timely” return of inflation to the bank’s 2 percent target. The bank’s staff forecast that inflation would average 5.3 percent this year and still be slightly above target in 2025.