The European Central Bank (ECB) raises its interest rate by 0.5 percentage point. The interest rate is now at 0.0 percent and is therefore no longer negative for the first time in eight years. In this way, the central bank hopes to curb inflation. It will probably also ensure that we will soon receive some interest on our savings.
Today, many eyes are on the ECB’s decision. The central bank is faced with the task of both limiting the high prices of goods and services and of protecting the European economies from a recession.
It was already known that the ECB would raise interest rates, but in recent weeks the regulator has been under pressure to come up with a substantial hike. This is because the prices of goods and services have risen sharply. By raising interest rates, people will save more and therefore spend less. It also ensures that companies are less likely to borrow. All this should slow down inflation.
At the same time, a recession threatens because the energy supply from Russia is in danger. To prevent a shrinking economy, it is more convenient to keep interest rates low, so that we spend more. However, the ECB now chooses to raise interest rates considerably.
The ECB also announces a new tool to keep outliers in the European market in check.