The European Central Bank (ECB) raised its key interest rate to all-time record-high level on Thursday, September 14, and signalled this will likely be its final move in a more-than year-long fight against stubbornly high inflation.
The decision raises the ECB’s benchmark deposit rate to 4 per cent, up drastically from minus 0.5 per cent just a little more than a year ago and the highest since the euro was established in 1999.
It marked the 10th straight increase since the central bank launched the most aggressive hiking cycle in its history in July last year after prices surged following Russia’s invasion of Ukraine.
The increase of a quarter-percentage point comes as central banks around the world, including the US Federal Reserve, try to gauge when to halt their swift series of rate rates before the economy tips into a downturn and people lose their jobs.
The major European economies — Germany, France, Spain and Italy — also saw shrinking activity in August in the services sector even at the tail end of a strong tourism summer in Spain and Italy, according to S&P Global’s surveys of purchasing managers. Services is a broad category that includes hotel stays, haircuts, car repairs and medical treatment.
That comes on top of a slowdown in global manufacturing that is hitting Germany, Europe’s biggest economy, particularly hard. The eurozone economy has been teetering on the edge of recession since last year, growing only 0.1 per cent in each of the first two quarters of this year.
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Updated: 14 Sep 2023, 06:03 PM IST