ECB raises base rate to 4.5%

The European Central Bank has decided to increase the key interest rate by 0.25% to 4.5%.

From September 20, the rate on the margin credit line will also be increased to 4.75%, the rate on the deposit line to 4%.

The increase in rates was the result of an analysis conducted by the central bank regarding inflationary trends, taking into account current economic and financial indicators, as well as changes in the dynamics of core inflation and the effectiveness of the current monetary policy. 

Despite the gradual decline in inflation, it is assumed that the high level will remain in the near future. In general, the ECB plans to reduce inflation to 2% by 2025.

Experts assumed that the rate would remain unchanged at 4.25% until the end of the current quarter. However, shortly before the meeting, some of them revised their expectations, predicting an increase to 4.5%.

After the announcement of the decision, the euro went down: the EUR/USD pair fell from 1.0740 to below 1.0700. The regulator's mention that interest rates have reached levels that will make a significant contribution to reducing inflation suggests a potential end to the tightening cycle that weakens the single currency.