ALBAWABA – The European Central Bank hiked the key Euro interest rate to a record high on Thursday in an attempt to curb inflation, despite cause to pause further hikes to take some pressure off the faltering Eurozone economy.
ECB policymakers raised Euro interest rates by another quarter point, taking the deposit rate to 4 percent and the highest level ever recorded, Agence France-Presse (AFP) reported.
This hike marked the 10th straight increase since the central bank launched the most aggressive hiking cycle in its history in July last year, after prices surged following Russia's invasion of Ukraine.
Still, the ECB raised its forecast for inflation this year and next, despite the rate hikes, and lowered it slightly for 2025 to 2.1 percent, close to the central bank’s target.
Policymakers also slashed their forecasts for eurozone growth over the next three years, pointing to the impact of "tightening on domestic demand and the weakening international trade environment".
A higher key Euro interest rate has put pressure on the Eurozone economy - Shutterstock
"Inflation continues to decline but is still expected to remain too high for too long," the ECB said in a statement, announcing its decision to hike the key Euro interest rate.
Recent data showed growth in the second quarter reached just 0.1 percent, lower than previously estimated for the Eurozone.
Europe's top economy is struggling to get back on its feet after sliding into recession around the turn of the year, hit by an industrial slowdown, high energy costs, and slowing exports to key partners such as China, according to AFP.
The weak data had fuelled calls for the ECB to pause its hiking cycle for fear it could deepen the downturn, but the central bank did not heed the calls.
Despite the rapid increase in borrowing costs since last year, inflation has proven to be remarkably stubborn, coming in unchanged at 5.3 percent in August, AFP reported.
ECB said rates had now reached levels that would help bring inflation back to target, and some analysts said it signalled the current hiking cycle was at an end.
