After raising interest rates by 0.25 percentage points to a joint record high, the European Central Bank has been advised to stop raising them further in light of rising recessionary risks.
Analysts cited worries about the decline in European real estate values as justification for the central bank to freeze borrowing costs at its three main interest rates.
With the most recent increase, the deposit rate paid by the ECB, which is paid on commercial bank deposits left overnight with the central bank, has risen to 3.75%, matching the previous high established in 2000–2001.
The ECB president, Christine Lagarde, hinted that the governing board will base its decisions on evidence before leaving the door open for additional rate increases.
Lagarde stated that the ECB will maintain interest rates at suitably stringent levels for as long as necessary to reduce inflation to its 2% target while speaking in Frankfurt after the US Federal Reserve likewise increased interest rates by 0.25 percentage points.
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ECB Warns of Uncertainty in Inflation and Economy
Although the rate of price increase varies from 1.9% in Spain to 9.7% in the Czech Republic, the inflation rate throughout the eurozone has decreased from 10.6% in June of previous year to 5.5% in June.
Inflation in Germany reached 6.7% in June, driven primarily by a 13.4% increase in food prices.
According to the ECB, the outlook for inflation and economic development in the eurozone is still very uncertain at this time.
Russian aggression against Ukraine, or the potential for a larger rise in geopolitical tensions, could have a negative impact on the economy and raise prices in the months to come, according to Lagarde.
She claimed that Russia’s pullout from the Black Sea grain program might give the growing costs of food and energy even more momentum.
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Source: www.theguardian.com