The European Central Bank (ECB) has today lifted interest rates across the eurozone by a record amount, in a bid to curb inflation.
The ECB lifted its deposit rate to 0.75% from zero and raised the main refinancing rate to 1.25%, which is their highest level since 2011. This pushes the ECB’s ‘main refinancing rate’ to 1.25%, up from 0.5%, while the ‘marginal lending rate’ paid by banks borrowing from the ECB goes up to 1.25%.
The ECB said in a statement: "The Governing Council took today’s decision, and expects to raise interest rates further, because inflation remains far too high and is likely to stay above target for an extended period. According to Eurostat’s flash estimate, inflation reached 9.1% in August.
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"Soaring energy and food prices, demand pressures in some sectors owing to the reopening of the economy, and supply bottlenecks are still driving up inflation. Price pressures have continued to strengthen and broaden across the economy and inflation may rise further in the near term."
The interest rate hikes will increase repayments for over 400,000 tracker and variable mortgage holders here. The move comes after weeks of canvassing by policymakers, with a seeming majority making the case for a 75 basis-point hike and a few policy doves trying to downgrade expectations.
The large hike comes as the ECB increased its own inflation forecasts and continues to see price growth well above its 2% target throughout its entire projection horizon. In Ireland, the price of goods and services increased by 8.7% in the year to August, the Central Statistics Office said, with the cost of food, energy and transport all still driving the surging cost of living.
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