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European Central Bank hikes interest rates, vows ‘we are not done’

Published:Thursday | February 2, 2023 | 4:34 PM
President of the European Central Bank Christine Lagarde attends a press conference following the meeting of the bank's governing council in Frankfurt, Germany, Thursday, February 2, 2023. (AP Photo/Michael Probst)

FRANKFURT, Germany (AP) — The European Central Bank chugged ahead with another outsized interest rate hike Thursday and vowed more will follow, underlining its drive to subdue inflation even as the economy slows and the US Federal Reserve eases its pace of increases.

The Frankfurt-based bank raised its key benchmarks by half a percentage point and said it intends to make a similar move in March.

Policymakers are moving aggressively to choke off price spikes that have slowed from record highs but are still hurting households in the 20 countries that use the euro currency.

The bank, which also hiked by a half-point in December, “will stay the course in raising interest rates significantly at a steady pace,” ECB President Christine Lagarde said at a news conference.

“Now you will say, 'Well, yes, but what about after March? Does that mean that you have reached the pinnacle or the peak?' she later added.

“No, no, no, no. We know that we have ground to cover. We know that we are not done.”

The Bank of England also went big Thursday with a half-point hike, but the Fed pulled back a day earlier, slowing to a quarter-point hike as central banks around the world reassess their approach to tackling price spikes that have started to slow.

The ECB sent a “relatively determined message” with the “unusual” pre-announcement of the March increase, said Nick Bennenbroek, international economist at Wells Fargo Economics.

He expects the March hike would be followed by a quarter-point bump in May that would mark the peak for ECB rates.

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