The ECB raised interest rates to their highest level in 23 years.

The European Central Bank (ECB) raised its benchmark lending rate in the eurozone on July 27 to curb inflation, but left open options for future decisions amid a weakening regional economy .

Policymakers raised interest rates for the 20 eurozone countries by 0.25%, pushing deposit rates up to 3.75%, the highest level since October 2000.

Speaking at a press conference on July 27, ECB President Christine Lagarde said that although inflation is slowing, it remains too high for too long.

She acknowledged that previous interest rate hikes are having an impact on the Eurozone, evidenced by tighter lending conditions and reduced borrowing demand. The short-term economic outlook is also deteriorating, partly due to these credit conditions, Lagarde noted.

However, the ECB president declined to give any indication of the bank's decision at its next policy meeting in mid-September, a departure from recent trends.

ECB President Christine Lagarde speaks to the media after the ECB Governing Council's monetary policy meeting in Frankfurt, Germany, on July 27. Photo: Yahoo!News/Reuters

"We are intentionally data-driven, and we have an open mind about decisions in September and in subsequent meetings. We may raise or maintain current interest rates," Lagarde shared.

"What I can guarantee is that we will not cut interest rates, absolutely not," Ms. Lagarde affirmed.

Consumer prices in the 20 eurozone countries have fallen since peaking at 10.6% in October 2022, but were still up 5.5% year-on-year in June. The ECB's target is to bring inflation down to 2% in the medium term.

After years of maintaining interest rates at near-zero and negative levels within the Eurozone, the central bank began raising rates in July 2022 following the Russia-Ukraine conflict, which caused energy and food prices to skyrocket.

The ECB's move came a day after the US Federal Reserve (Fed) raised interest rates by 0.25%, also the highest level in 22 years.

Even as the pace of consumer price increases has slowed in recent months, U.S. policymakers have warned that they still face the daunting challenge of bringing inflation back to the 2% target “in time.”

On July 26, Fed Chairman Jerome Powell stated that while progress has been made in reducing inflation, interest rates have not remained constrained long enough in the U.S., and officials are prepared to raise rates further if necessary. Powell also affirmed that the Fed will not cut interest rates this year .

Nguyen Tuyet (According to DW, NY Times)

Source: https://www.nguoiduatin.vn/ecb-tang-lai-suat-len-muc-cao-nhat-trong-23-nam-a619217.html