ECB dares the largest rate hike since the introduction of euro cash

Die European Central Bank (ECB) raises key interest rates by 0.75 percentage points. The central bank announced this on Thursday after the September meeting of the ECB Council. In view of the sharp rise in inflation in the euro area, the monetary authorities are thus daring to take an unusually large interest rate step: it is after all the sharpest increase in the key interest rate since the introduction of euro cash 20 years ago. However, it is following America’s central bank, the Federal Reserve, which has already raised interest rates by this magnitude twice.

Until the very end, economists and analysts had been puzzling over the past few days as to whether it would be 0.5 or 0.75 percentage points – individual ECB observers had also expected just 0.25 percentage points.

Fight against the highest inflation in the history of monetary union

The main refinancing rate, the real one policy rate by the central bank, rising from 0.5 to 1.25 percent. The top refinancing rate increases from 0.75 to 1.5 percent. And the deposit rate for bank deposits at the central bank will rise from 0 to 0.75 percent.

This is the ECB’s second interest rate hike in a long time: In July, the monetary watchdogs raised interest rates for the first time in eleven years. Nevertheless, inflation continued to rise in August to its highest level since the founding of the European Monetary Union – and is unlikely to have peaked yet. Many economists expect it to exceed the 10 percent mark in the fall. Gas prices in particular are likely to continue to drive up the cost of living.

In some euro countries it is inflation now at 20 percent and more. Estonia is at the top with 25.2 percent. The inflation rate is now in double digits in many euro countries, for example in Spain at 10.3 percent and the Netherlands at 13.6 percent. Germany is still more in the middle: According to the national calculation method, the German inflation rate was 7.9 percent in August, according to the European calculation method of the Harmonized Index of Consumer Prices (HICP), it has already reached 8.8 percent.

Savers in Germany are now also benefiting from the turnaround in interest rates: even if the savings interest on most accounts is still meager, at least the negative interest on savings has been abolished at many institutions. ING Germany was one of the pioneers in this step, but also, for example, Deutsche Bankwhich originally wanted to phase out its negative interest rates first in October, now did so in August.

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