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The European Central Bank (ECB) announced a tenth straight increase in its benchmark interest rate, potentially signalling the final step in a series of measures to return inflation to target.
On Thursday, EU policymakers boosted interest rates by another quarter percentage point, bringing the highly monitored benchmark to 4%, the highest level since the euro’s inception in 1999.
Just 14 months ago, the rate was at a record low of minus 0.5%, implying that banks from across the Eurozone had to pay to secure their funds at the ECB.
The latest increase came shortly after the ECB raised its macroeconomic estimates for the eurozone, predicting average inflation of 5.6% in 2023, up from 5.4% previously, and 3.2% next year, up from 3% previously.
Simultaneously, the report reduced its medium-term projection from 2.2% to 2.1%.
“Inflation continues to decline, but it is still expected to remain too high for too long,” the regulator said in a statement. “The governing council is determined to ensure that inflation returns to its medium-term target of two percent in a timely manner.”
The EU has been fighting to combat the bloc’s raging inflation, which has been fueled by skyrocketing energy prices. The ECB began its most aggressive rate-hiking cycle on record in July 2022, following the imposition of sanctions on Moscow, which sent petrol prices rising and jeopardised the majority of commerce between Russia and the bloc.