Increase in the base interest rate
For the first time since 2011, the European Central Bank has decided to raise its key interest rates as its main anti-inflationary tool. With effect from 27 July, all ECB rates are increased by 0.5 percentage point: the refinancing rate to 0.5, the deposit ratte to 0 and the lending rate to 0.75 percent. ECB President Christine Lagarde made the announcement after the monetary policy meeting on Thursday.
The first step on the road to rate normalisation
“The Executive Board judged that it was right to take a larger first step towards normalising rates as signalled at the last meeting,” Lagarde said. At the same time, she stressed that further steps would follow on the basis of the data and would be aimed at fulfilling the ECB’s mandate to keep inflation at 2% over the medium term.
The ECB has also introduced an anti-fragmentation tool to stabilise the bond market in order to prevent excessive divergences in the yields of euro area government bonds. The measure is intended to help its southern wing in particular.
