European Central Bank raises interest by 0.75 percentage point: biggest jump ever | News

The ECB will raise key interest rates to combat high inflation. It is the largest interest rate hike by the central bank ever. The central bank is also forecasting further interest rate hikes in the coming months. ECB President Christine Lagarde will explain the interest rate decision later.

By raising interest rates, the ECB wants to make money more expensive. Higher interest rates will increase borrowing costs for households and businesses. This makes borrowing more expensive and that is expected to cause people and companies to spend less money, so that demand in the economy decreases and prices rise less rapidly in the long run. Banks can raise the interest on savings accounts, but banks have already indicated that the chance is small that they will change their current policy much.

In July, interest rates were already raised by half a percentage point. That was the first interest rate hike by the ECB since 2011. The penalty interest that banks had to pay was abolished. Inflation in the euro area has now risen further, due to persistently high energy and food prices as a result of the war in Ukraine. In August, inflation reached a record 9.1 percent year-on-year.

After all, fears of a recession in the eurozone are increasing as Russia takes an ever tougher stance on the energy crisis. In addition, factory orders in Germany have already fallen for six months in a row.

The European statistical office Eurostat announced on Wednesday that the economy of the euro area grew by 0.8 percent on a quarterly basis in the second quarter, according to a definitive figure. That was stronger than previously thought. An earlier estimate reported a growth of 0.6 percent.

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