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The ECB raises rates by 75 basis points, to their highest level in more than a decade

The Governing Council warns that it will continue to raise rates in the next meetings.

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The ECB raises rates by 75 basis points, to their highest level in more than a decade

The Governing Council warns that it will continue to raise rates in the next meetings

MADRID, 8 Sep. (EUROPA PRESS) -

The Governing Council of the European Central Bank (ECB) has decided to raise interest rates by 75 basis points, so that the interest rate for its refinancing operations will be 1.25%, while the deposit rate will reach 0.75% and the loan facility, 1.50%.

In this way, the price of money has reached its highest level since 2011, when the ECB began a path of stimulus at the monetary level that has lasted more than a decade and that led it to place interest rates in negative territory. .

Likewise, it is the first time in the entire history of the ECB that such a large rise in the price of money is undertaken. The last time a similar increase was applied was in 1999, as part of the transition process towards the adoption of the euro.

"According to the current assessment, during the following meetings the Governing Council expects to raise interest rates further to soften demand and as protection against the risk of a persistent increase in inflation expectations," the agency has warned.

The monetary authority has explained that it has adopted this decision today and that it plans to continue raising rates "because inflation remains too high and will probably be above the target for an extended period."

Due to the fact that the price of money has abandoned negative rates, the monetary authority has explained that it is abandoning the double remuneration system for excess reserves that it had been applying until now to bank reserves.

The ECB has recalled that, in any case, the principal of the overdue debt that has been purchased under the pandemic purchase program (PEPP) will continue to be reinvested until the end of 2024. On its side, purchases of the public asset program (APP, for its acronym in English) will be maintained for an "extended" period of time since the ECB began raising rates (July).

The agency has stressed that the PEPP maturities are being reinvested in a "flexible" way to counteract the risks of the monetary policy transmission mechanism in relation to the pandemic.

INFLATION AND GDP

The gross domestic product (GDP) of the euro zone registered a quarter-on-quarter increase of 0.8% in the second quarter of 2022, one tenth more than in the previous three months, according to the latest data published by Eurostat, the office of community statistics.

On the other hand, prices registered an inflation of 8.9% in July, three tenths more than in the previous month, due to the increase in energy and food prices, marking their maximum since there are records historical.

Likewise, the interannual rate of core inflation of the countries that have adopted the euro as their common currency, which is the result of excluding from the calculation the evolution of the prices of energy, fresh food, alcohol and tobacco, rose by three tenths, up to 4%.

With regard to unemployment, the rate for July in the euro zone, the last available, fell one tenth, to 6.6%. In the EU as a whole, unemployment stood at 6%, also one tenth less than in June.

The next meeting of the Governing Council of the body responsible for the monetary policy of the eurozone will be held on October 27, 2022.

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