The European Central Bank announced a rise in the eurozone interest rate and it will lead to the fight against inflation. Prices are rising in the bloc at the highest pace for about half a century. The ECB also lifted its key rates by the three-quarter of a percentage point. They also warned that it was likely to raise later this year.
The bank raised interest rates in July, the first increase in more than 11 years. In the words of the ECB, “Price pressures have continued to strengthen and broaden across the economy.” They also raised their deposit rate, as people have to pay deposits of 0.75% from zero.
The central bank raises the interest rates to increase borrowing costs, and it should lead people to borrow and spend less and save more. Let us tell you that inflation in the world is being driven by high energy prices. Prices were rising more quickly and the economy was recovering from the effects of the covid-19. But they jumped further because of the Russia and Ukraine war.
Christine Lagarde, the President of the ECB, said that the central bank will not be able to control high energy prices for much longer. He also said that he could not convince the major players to reduce the price of gas. He also added that the high gas prices will lead to a recession very soon.
FAQ
- Who is the ECB president?
Ans. Christine Lagarde
- When did interest rates rise last time?
Ans. Last July
- Do price rises lead to a recession?
Ans. Yes
