Negative interest rate era over after ECB surprise

The European Central Bank announced this afternoon (July 21) that it will raise interest rates by 50 basis points. This is the first increase in eleven years. With that, the negative interest rate era in the eurozone is over.

With the increase of 0,5 percentage point, the interest that banks pay to park money at the ECB will be 0%. The increase is greater than the quarter percent previously announced by ECB President Christine Lagarde. However, the wider increase does not come as a complete surprise. In recent days, the ECB's intentions had already been leaked to Bloomberg in order to contain a shock reaction in the financial markets. 

The accelerated rate hike has everything to do with the high inflation in the eurozone. It was 8,6% in June, which is a record. This is more than four times the inflation that the ECB is aiming for. Inflation is not only limited to energy, but is also clearly reflected in food prices.

The ECB indicates that interest rates are likely to rise further in the coming months. Each time it will be viewed, taking into account the economic circumstances.

Wouter Job

Wouter Baan is Head of Meat & Dairy at BoerenbusinessAt DCA Market Intelligence, he focuses on dairy, pork, and meat markets. He also monitors (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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