Europe's central bank hikes interest rates again even as threat of recession grows
The European Central Bank has piled on a 10th straight interest rate increase
FRANKFURT, Germany — The European Central Bank piled on a 10th straight interest rate increase Thursday, pressing forward in its fight against stubbornly high inflation that has been plaguing consumers even as worries grow that higher borrowing costs could help push the economy into recession.
The increase of a quarter-percentage point comes as central banks around the world, including the U.S. Federal Reserve, try to judge how much anti-inflation medicine is too much — and what’s the right point to halt their swift series of rate rates before the economy tips into a downturn and people lose their jobs.
The decision raises the ECB’s benchmark deposit rate to 4%, up drastically from minus 0.5% just a little more than a year ago and the highest it has been since the euro was established in 1999.
“Future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary,” the bank said in a statement, adding that it will keep relying on available data.
Annual inflation of 5.3% in the 20 countries that use the euro currency is well above the bank’s target of 2%, robbing consumers of purchasing power and contributing to economic stagnation — supporting arguments for the rate increase.
Pushing the other way was the growing awareness that higher borrowing costs are weighing on decisions by consumers and businesses to invest and spend and are becoming a burden on the economy.
“The ECB’s communcation was clear: today was the last hike in the current cycle,” said Carsten Brzeski, chief eurozone economist for ING bank.
“Looking ahead, a further weakening of the economy and more traction in a
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