ECB raises key interest rate for 1st time in 11 years amid inflation

Jul 22 , 2022. 11 hours ago – 23:04 KYODO NEWS

Sculpture with the euro logo in front of the European Central Bank building on March 27, 2020, in Frankfurt, Germany. (DeFodi Images/Getty/Kyodo)

FRANKFURT – The European Central Bank on Thursday raised its benchmark interest rate from zero to 0.5 percent, the first such rate hike in 11 years, joining the U.S. Federal Reserve and other central banks in their monetary tightening to fight soaring inflation.

The decision at the ECB’s policy meeting comes as the Russian invasion of Ukraine pushed up prices of goods from food to energy, putting pressure on household budgets across the bloc. The rate hike is effective from Wednesday next week.

The ECB decided on the larger-than-expected rate rise after having said last month that the rate would be up by 0.25 percentage point.

The central bank also raised two other key interest rates — its deposit rate and lending rate — by 0.5 percentage point.

The ECB last hiked its key interest rates in July 2011.

Eurozone inflation hit a new record high in June, with its consumer price index rising by 8.6 percent year-on-year, well above ECB’s 2 percent target.

The ECB said last month that another rate hike is possible in September.

Meanwhile, the Bank of Japan maintained its ultralow rate policy on Thursday to support the nation’s budding economic recovery, bucking the global trend of monetary tightening.