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| ECB raises interest rates for 8th consecutive time. A Spanish food market. (Source: Bloomberg) |
This is the 8th consecutive interest rate hike by the European Central Bank (ECB) in less than 1 year from July 2022. The ECB's basic deposit rate has increased from -0.5% to 3.5%, a historical high recorded since 2001.
The reason for the ECB to raise interest rates is that inflation in the countries using the Eurozone, although it has decreased from the peak of 10.6% in October last year to 6.1%, is still more than 3 times higher than the target of 2%.
This is a positive sign that commodity prices may be coming down after peaking in double digits in October 2022. However, economists say it may be months before consumers feel truly “unburdened” when shopping at stores.
European financial experts say this is not the last interest rate hike by the European Central Bank.
75% of economists surveyed predict that the ECB may implement the ninth interest rate hike next July, bringing the bank's deposit interest rate to 3.75%, to maintain the strength of the euro when inflation has not yet decreased to the target of 2%.
In May 2023, core inflation adjusted for volatile food and energy prices was also much higher than the target of 5.3%.
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