EZB-Zentrale in Frankfurt am Main
Foto: Daniel Roland / AFP
The European Central Bank (ECB) continues its course of raising interest rates in the fight against inflation with the tenth consecutive increase. On Thursday, it raised key rates by a quarter percentage point, just as it did in July. This brings the benchmark interest rate in the Eurozone to 4.5 percent.
The deposit rate, which is influential in the financial markets and represents the interest banks receive for parking surplus funds, increases from 3.75 to 4.00 percent. This is the highest level since the establishment of the currency union in 1999.
The ECB is currently facing two major economic policy problems. Firstly, the European economy is sluggish, with even Germany, the largest economy in the Eurozone, experiencing a recession. This would suggest lower interest rates in order to stimulate the economy and lending. However, this is countered by the slow decline in inflation.
Probleme in der Inflationsbekämpfung
The increase in interest rates is considered the best tool internationally to combat inflationary waves. The European Central Bank (ECB) operates within this tension. Many economists had speculated until a week ago that the central bank might pause its interest rate hikes due to poor economic performance. However, since then, market participants have become more convinced that another rate hike is necessary to fight inflation. The ECB has now met these expectations.
Die Inflation im Euroraum wird nach Einschätzung der Zentralbank nun noch langsamer zurückgehen als vor drei Monaten erwartet. Für das laufende Jahr rechnet die Notenbank nun mit einer Teuerungsrate von 5,6 Prozent. In ihrer Juni-Prognose war die EZB noch von 5,4 Prozent Inflation im Jahresschnitt 2023 ausgegangen.
In 2024, the central bank also predicts a higher inflation rate of 3.2 (June forecast: 3.0) percent, while in 2025, a slightly lower rate of 2.1 (2.2) percent is expected. The ECB aims for a stable price level in the currency area of the 20 countries, with an annual inflation rate of 2 percent in the medium term.
The economy in the Eurozone is projected to grow by 0.7 percent this year, according to the latest ECB forecast, which is slightly weaker than the previously predicted 0.9 percent in June. In the following year, the GDP is expected to increase by 1.0 percent (June forecast: 1.5 percent). The ECB anticipates a growth of 1.5 percent (1.6 percent) in the economic output of the currency area by 2025.