The ECB raises interest rates to control inflation
The European financial institution raised interest rates in order to stop the increase in prices
The European Central Bank (ECB) announced a half percentage point increase in the interest rate, raising it from 2.5 % to 3.0 % on average for deposit returns.
In a press release, the ECB explained that the increase will be reflected in the three official interest rates, with effect from March 22, 2023. In addition, the measure aims to control inflation in the euro area, which it is expected to be below the ECB’s target of 2 %.
The rise in the interest rate can have an impact on the financial markets, especially on the foreign exchange market. By increasing the interest rate, the euro becomes more attractive to investors, which can lead to appreciation of the euro against other currencies, such as the US dollar.
It is important to note that raising interest rates is an instrument used by central banks to control inflation. If the interest rate is low, the cost of money is low, which means that people and businesses can borrow more easily, leading to more spending and investment, stimulating economic growth.
(Reference image source: file)
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