FRANKFURT: The European Central Bank (ECB) increased its benchmark interest rates by 50 basis points (bps) and stated that it would continue to do so in order to rein in the eurozone's out-of-control inflation.
According to a statement released by the bank, the interest rates on the major refinancing operations, the marginal lending facility, and the deposit facility would rise to 2.5%, 2.75%, and 2%, respectively, starting on December 21. The primary driver of the ECB's action has been the inflation forecast, which has been significantly upgraded. The bank stated that interest rates would need to "increase significantly at a steady pace."
Following the change, the staff of the Eurosystem predicted that inflation in the eurozone would reach 8.4% in 2022, 6.3% in 2023, 3.4% in 2024, and 2.3% in 2025.
In November, the eurozone's inflation rate decreased marginally to 10%.
According to the bank, price pressures are still intense across industries as long as energy prices remain high. The ECB defended its actions by stating that hiking rates would slow inflation over time by reducing demand and protect against the possibility of a persistent upward change in inflation expectations.
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