Russia’s war in Ukraine has sent shock waves through the EU economy, particularly through rising energy prices.
The European Central Bank said Thursday it plans to carry out its first interest rate increase in 11 years next month, followed by another hike in September, as it catches up with other central banks worldwide in pivoting from supporting the economy during the pandemic to tamping soaring inflation. The surprise announcement came after the bank’s 25-member monetary policy council met in Amsterdam, saying inflation had become a “major challenge” and that those forces had “broadened and intensified” in the 19 countries that use the euro currency. It will end its economic stimulus program and raise rates by a quarter-point in July. The move underlines concerns about surging consumer prices, which rose by an annual rate of 8.1% in May, the highest since statistics started in 1997. The bank’s target is 2%. Russia’s war in Ukraine has sent shock waves through the EU economy, particularly through rising energy prices. Today we took our latest monetary policy decisions:
????We will end net purchases under our asset purchase programme as of 1 July 2022
????We intend to raise our interest rates by 0.25% in July and expect to increase them again in September
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The ECB left open the possibility that it would make a more drastic, half-percentage-point increase in September rather than the more usual quarter-point adjustment, saying that if the inflation outlook persists or deteriorates, “a larger increment will be appropriate at the September meeting.
