European Central Bank Raises Rates for the First Time in 11 Years

On Thursday, the European Central Bank (ECB) raised interest rates in the eurozone for the first time in 11 years, as high and rising inflation becomes central bankers’ primary concern. (This is a developing story and is being constantly updated.)

The 50 basis points rate hike is higher than analysts had expected, and marks a departure from the zero-interest rate environment the EU has been in since 2016.

The general consensus has been that the ECB would raise rates by 25-basis points, but a 50-point hike has in recent days been seen as increasingly likely due to soaring consumer prices in the eurozone.

"The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalization path than signaled at its previous meeting," the ECB said.

ECB interest rate ahead of Thursday’s hike:

Commenting ahead of the rate hike, analysts at Deutsche Bank said in a note to clients cited by CNBC that unpublished inflation expectations data may have made ECB officials worried. As a result, a 50-basis point hike has been on the table recently, they wrote.

Moreover, the analysts also pointed to the so-called anti fragmentation instrument that ECB President Christine Lagarde has been focused on recently, saying a 50-point hike would help in negotiating the details of such a tool.

The anti-fragmentation instrument was also pointed to by others, with Dirk Schumacher of financial researcher Natixis writing in a note that Lagarde is likely to stress the “temporary nature” of such an instrument.

“[…] she will also underline the ECB’s determination to secure the integrity of the monetary union, thereby trying to evoke a ‘whatever it takes’ spirit,” Schumacher wrote, adding that the fine line Lagarde needs to walk