European Central Bank raises rates again as inflation battle drags on
The European Central Bank (ECB) raised interest rates by a quarter percentage point on Thursday, continuing an historic stretch of interest rate hikes meant to conquer high inflation.
Why it matters: The ECB is the latest central bank, following the Federal Reserve, to raise borrowing costs to multi-decade highs — an attempt to cool off the economy in the hopes that inflation will follow.
What they're saying: "Inflation continues to decline but is still expected to remain too high for too long," the central bank said in a policy statement.
- The central bank did not give a clear signal of whether it plans further rate increases.
- Yes, but: It said it would continue to evaluate economic data to determine the "appropriate level" of interest rates — and how long they need to stay that high.
Catch up quick: The Eurozone, which faced huge disruptions to its energy supply when Russia invaded Ukraine, saw inflation drop sharply in June.
- The headline inflation rate rose 5.5% in the 12 months through June, slowing from 6.1% the prior month as energy costs plummeted.
- But the core measure, which excludes energy and food prices, rose from May's mark of 5.3% to 5.5%.
What to watch: Like the Fed, ECB officials are monitoring how its previous interest rate increases are working through the economy.
- "The past rate increases continue to be transmitted forcefully: financing conditions have tightened again and are increasingly dampening demand, which is an important factor in bringing inflation back to target," the central bank said in a statement.