The European Central Bank announced Thursday that it will raise interest rates by 0.25 percentage points in July. The ECB said that it will stop the asset purchase program as part of his efforts to confront the record inflation rate.
The interest rate hike for the first time in 11 years comes as an attempt by the bank to reduce high prices in the eurozone countries. The inflation rate reached 8.1 percent last month, significantly above the target of less than 2 percent.
The ECB has been adopting negative interest for a while.
It said it would “make sure” that inflation returned to this target, pointing to a possible rate hike in September, after a meeting with the bank’s governing council in Amsterdam.
It also announced the end of the asset purchase program, starting on the first of July.
The central bank began buying bonds on a large scale in 2009 to counter the sovereign debt crisis.
Today, the bank expected annual inflation to reach 6.8 percent in 2022, before declining to 3.5 percent in 2023 and 2.1 percent in 2024.
The bank also lowered its forecast for the annual growth of the euro zone from 3.7 percent to 2.8 percent for the current year.
ECB President Christine Lagarde said at a press conference that inflation risks are “high”. She explained that “the inflation expectations in the medium term include a continuous worsening of the productive capacity of our economy and a permanent rise in energy and food prices,” adding that “inflation expectations are above our target and higher than the expected wage increases.”
