Frankfurt, Germany, Jul 21 (EFE).- The European Central Bank on Thursday raised its interest rates for the first time in 11 years in a bid to tackle soaring inflation.
“Today, in line with our strong commitment to our price stability mandate, the Governing Council took further key steps to make sure inflation returns to our 2% target over the medium term,” ECB president Christine Lagarde told a press conference in Frankfurt.
Lagarde said the ECB was increasing its key interest rate by 50 basis points — 0.5 percentage points to 0.0%.
The ECB interest rate has been negative since 2014 as part of an experiment to boost Europe’s economy after years of slow growth.
“The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalization path than signaled at its previous meeting.
“The frontloading today of the exit from negative interest rates allows us to make a transition to a meeting-by-meeting approach to our interest rate decisions,” Lagarde said.
The move comes as inflation in Europe increased to 8.6% in June, largely driven by the Russian invasion of Ukraine which has spiked global energy and food prices.
“Economic activity is slowing. Russia’s unjustified aggression towards Ukraine is an ongoing drag on growth,” the ECB president said, adding that the impact of high inflation was “dampening” the bloc’s economy.
Lagarde warned inflation was expected to remain “undesirably high for some time” and that inflationary pressures were also a cause of the “depreciation of the euro exchange rate”.
Earlier this month, the euro dropped below parity against the dollar for the first time in 20 years, exasperated by recession concerns in the euro area. EFE