The deposit rate, the rate at which banks deposit their deposits with the central bank, will rise from -0.5% to -0.25% next month. Interest rates will also rise in September. Then it will be the first time in eight years that the interest rate has returned to 0%. The ECB wants to use this to combat the soaring inflation in the eurozone.
This time, the ECB meeting took place in Amsterdam. On Wednesday and today, the ECB board, together with the national central bank governors, met in the Council Chamber of the former town hall. Wednesday evening there was a dinner in the Hall of Fame of the Rijksmuseum, where the royal couple was also present.
The ECB will stop buying bonds this month. This instrument stemmed from the aftermath of the euro crisis, when the ECB wanted to boost inflation in this way. The ECB also bought up bonds on a large scale during the pandemic.
Unique
Later this afternoon, ECB President Christine Lagarde will explain the decision. In particular, she will have to defend herself against criticism that the ECB is far too late in tightening monetary policy. In May, inflation in the eurozone rose to 8.1%, although many countries are still above it. In the Netherlands, prices rose by 10.2% last month.
The fact that the ECB announces so concretely with which steps the interest rate will rise and when is unique. Moreover, the central bank is taking into account that interest rates will rise by a larger step in September, if inflation rises even faster. After September, interest rates can rise even further, although the ECB has not yet committed itself to concrete further steps.
King Willem-Alexander and Queen Maxima during a dinner with European central bank heads in the Rijksmuseum. These are in the Netherlands because the interest rate meeting of the European Central Bank (ECB) takes place once in Amsterdam.
ANP /HH
New estimates of economic growth and expected inflation were also released. Core inflation, i.e. minus volatile energy and food prices, will average 3.3% in 2022. In 2023 this will be 2.8% and in 2024 2.3%. The latter figure is striking, as it shows that the ECB expects inflation to remain higher than its own target in the coming years. That means the central bank sees reason to tighten even further in the coming months.
Eurozone growth is expected to reach 2.8% this year, 2.1% in 2023 and 2.1% in 2024.
Follow the press conference and the reactions to the interest rate decision live below: