ECB interest rate hike against inflation
The dispute between Russia and Ukraine, which has been ongoing since early 2022, and the ongoing energy crisis are two factors fueling inflation. In February 2023, the Inflation rate in the euro area at 8.5 percent more than four times the target set by the European Central Bank (ECB). In view of the currently high inflation rate in the euro area, the ECB is raising the key interest rate to counteract an excessive increase in consumer prices.
By raising the interest rate, the ECB reduces the amount of money in circulation, thereby increasing the value of the euro. This encourages consumers to save more, which in turn reduces demand and lowers consumer prices, ultimately helping to lower inflation.
The effects of the noticeable rise in interest rates affect a wide range of consumer groups, including not only savers and investors, but also borrowers, life insurance policy holders and home builders. But who can benefit from the higher interest rates and what risks could this entail?