The European Central Bank (ECB) has increased interest rates to 4.25%

The European Central Bank (ECB) has reached a milestone with its ninth consecutive interest rate increase, taking it to its highest level in 16 years, marking a full year since the start of the current cycle of monetary policy tightening.

The ECB’s Governing Council has decided to raise interest rates by 25 basis points, in line with market expectations. This brings the reference rate for refinancing operations to 4.25%, the deposit rate to 3.75%, and the lending rate to 4.50%.

This ninth consecutive increase in the price of money marks the highest level in 16 years and completes a full year since the ECB began the current cycle of monetary policy tightening.

With the latest quarter-point hike, the ECB has now raised interest rates by 425 basis points since the rate increases commenced in July of the previous year.

Eurozone inflation declined to 5.5% year-on-year in June, down from 6.1% in May, representing the lowest increase in prices since January 2022. However, core inflation accelerated to 5.5%.

In the first quarter of 2023, the eurozone’s gross domestic product (GDP) showed no growth compared to the previous three months, where the region experienced a slight contraction of 0.1%. This revised figure narrowly helped the eurozone avoid entering a technical recession.

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