The European Central Bank raised interest rates for a third consecutive meeting on Thursday and signaled its intention to begin withdrawing cash from the banking system to fight record-high inflation.
The ECB is undoing years of aggressive stimulus in a matter of months after being blinded by a sudden rise in prices – the result of high energy costs caused by Russia’s invasion Ukraine and the uneven reopening of the economy following the COVID-19 pandemic.
The central banks of the 19 countries that share the euro raised the interest rate paid on bank deposits by 75 basis points, taking it to a high of 1.5% since 2009.
“The Governing Council took today’s decision, and expects to raise interest rates further to ensure a timely return to inflation … 2%,” the ECB said.
But the ECB reiterated its plan to keep reinvestment proceeds from the 3.3-billion-euro stack of bonds it bought under its asset purchase program (APP) over the past eight years, when it thought inflation was going to remain low.
“The Governing Council intends to continue to reinvest in full the principal payment from mature securities purchased under the APP,” the ECB said.
Finally, the ECB changed the terms of its long-term refinancing operations to encourage banks to repay those multi-year loans early.
With Thursday’s decision, the ECB also raised the rate on its core refinancing operation, a weekly cash auction that banks have barely tapped for years, from 1.25% to 2.0% and on its daily marginal credit facility from 1.5% to 2.25%. until.
read all latest business news Here