The European Central Bank (ECB) will raise interest rates in the eurozone in steps. That's the first time in 11 years. The deposit rate, which is still negative, will increase by 25 percentage points to minus 0,25% in July. The ECB board, led by Christine Lagarde, expects to implement another rate hike in September.
The ECB has not yet announced how high this increase will be. That depends on inflation. If the inflation outlook remains as it is or deteriorates, the ECB cannot rule out a rate hike higher than the 25 percentage points in June. In that case, the interest rate will no longer be negative in September. The ECB has this decision taken today (June 9) at the board meeting in Amsterdam.
The ECB has been under great pressure to adjust interest rates due to the skyrocketing inflation in the eurozone in recent months. For example, inflation in the eurozone averaged 8,1% in May. In the Netherlands, inflation itself was 8,1% last month, as reported by the CBS† The ECB aims for an average inflation rate of 2%. In the statement, the board emphasizes that it will ensure that inflation returns to this 2% in the medium term.
After September, based on its current information, the Governing Council of the ECB expects interest rates to rise further. Much depends on the effects of the July and September increases on inflation. In anticipation of the first rate hike, the ECB has announced that it will end its government bond purchase program (APP) as of 1 July 2022.
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