European Central Bank meets today for eurozone interest rates decision

European Central Bank meets today for eurozone interest rates decision
Credit @Robert Steenland

The European Central Bank (ECB) will meet again on Thursday to decide on interest rates, with experts expecting that they will be raised further to curb the sky-high inflation across the eurozone. Key questions remain, however, on how big the interest rate hike will be.

Several analysts are predicting the biggest interest rate rise in more than twenty years: by 75 basis points (+0.75). But on Wednesday, this chance was already considered a little smaller, due to fears of a heavy impact on the economy in the eurozone. So, it could also be a 50 basis points increase in interest rates.

Raising interest rates would make borrowing more expensive, which would reduce demand, and give the European economy and prices a chance to cool off. Eurozone inflation rose to a record 9.1% in August, while the ECB aims for inflation of around 2%.

After years of interest rate cuts - even negative deposit rates for banks that stored money at the ECB - the central bank has turned the corner this summer.

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In July, the first interest rate increase (+50 basis points) in eleven years was announced. The penalty interest rate that banks had to pay was abolished. This intervention has not yet slowed inflation, but had the opposite effect, so a new interest rate increase is expected today.

On Wednesday, Bloomberg news agency saw more doubts emerge in the financial markets about a 75 basis point increase; the highest since 1999.

Fears of a recession in the eurozone are increasing, as Russia gets tougher in the energy crisis. In addition, factory orders in Germany fell for six months in a row.


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