Interest rates in the Eurozone hit a joint record high
The bank raised the rate for deposits in the group of 20 countries for the ninth time in a row, from 3.5% to 3.75%.
The European Central Bank (ECB) said that inflation was still going down, but it was still expected to stay “too high for too long.”
In an effort to control prices, the US central bank raised interest rates on Wednesday to their highest level in 22 years.
In the UK, where inflation fell to 7.9% in June, the Bank of England’s base rate is 5%. Most people expect the Bank to raise rates to 5.25% at its next meeting on August 3.
The idea behind raising rates is to make it more expensive to borrow money, which will cut down on demand and make it harder to pass on price increases.
Food and energy prices have gone up in the eurozone, just like they have in other places. This has put a strain on families.
5.5% is the rate of inflation in the eurozone. Food price growth has kept going down, but in June it was still 11.6%.
The ECB said it was determined to get inflation back to its long-term goal of 2% as soon as possible.
As prices went up for customers, the eurozone went into a recession last winter, as new numbers show.
Between January and March, the economy of the eurozone shrunk by 0.1%. The same thing happened in the last three months of 2022.
The ECB said on Thursday that events since its last meeting back the idea that “inflation will drop further over the rest of the year but will stay above target for a long time.”
It also said that the previous rate hikes seemed to be working and were “weakening demand,” which is an important part of getting inflation back to the goal level.
But it also said, “While some measures show signs of easing, underlying inflation remains high overall.”
High inflation and higher interest rates made people less likely to spend money. This made the “near-term economic outlook for the euro area worse, mostly because domestic demand has weakened.”
The bank said that this was especially hurting industry output, which was already low because of weak demand from other countries.
But it also said, “Over time, falling inflation, rising incomes, and better supply conditions should help the recovery.”