ECB raises interest rates by 0.75 basis points to fight record inflation

The European Central Bank (ECB) on Thursday has raised interest rates by 75 basis points for the second time in a row.

In recent months, soaring energy and food prices, supply bottlenecks and the post-pandemic recovery in demand have led to a broadening of price pressures and an increase in inflation. The Governing Council’s monetary policy is aimed at reducing support for demand and guarding against the risk of a persistent upward shift in inflation expectations, the bank said in a statement.

With this, it has increased policy rate by 1.5 per cent, the highest in a decade, the bank said, adding it would raise rates further to “ensure the timely return of inflation to its 2 per cent medium-term inflation target”.

The ECB lifted interest rates by a combined 125 bps at its past two meetings, the fastest pace of policy tightening on record, but inflation may still be months from its peak, pointing to even more tightening from a bank that started hiking well after most of its top peers.

Ahead of the rates, European shares fell in early trading on Thursday, as disappointing earnings soured the mood in global markets and traders were cautious ahead of an expected 75 basis point from the ECB.