Bloomberg: ECB Considers Interest Rate Hike of Half a Percentage Point

The European Central Bank (ECB) is said to consider raising interest rates by 0.5 percentage points at its policy meeting on Thursday.


That would be double the interest rate hike of a quarter of a percentage point that the central bank has previously forecast. That’s what insiders say to Bloomberg news agency.

The more significant interest rate hike would result from continued high inflation in the eurozone, which rose further in June to a new all-time high of 8.6 percent. Inflation is, therefore, more than four times above the ECB’s target of 2 percent. This would also make the ECB more in line with other central banks that have already raised interest rates significantly in the fight against inflation.

The ECB is expected to raise interest rates on Thursday for the first time since 2011. The central bank has so far hinted that it wants to raise interest rates gradually from July. It is therefore unclear whether there will be sufficient support for a firmer interest rate hike of half a percentage point. However, ECB President Christine Lagarde said in a speech on June 28 that there is room for a larger rate hike if inflation remains stubbornly higher than expected.

The euro appreciated on Tuesday morning on speculation of a more aggressive rate hike in the euro area. The coin was worth $1,0232 against $1,0160 a day earlier.

Last week the euro was still under considerable pressure, and the single currency was worth slightly less than 1 dollar for the first time in twenty years. This was partly due to concerns about a possible eurozone recession if Russia completely turned off the gas tap to Europe. This has led to speculation that the ECB will have to be more careful about raising interest rates not to slow down the economy too hard.

Leave comment