The European Central Bank raised interest rates again on Thursday as policy makers attempt to bring down record high inflation.

The bank increased 3 key rates in the biggest rise since 1999, by 0.75 percentage points.

  • This is the largest interest rate hike in the central bank’s 24-year history. 
  • It underscores the central bank's intense fight against inflation.
  • Christine Lagarde, the President of the ECB said she believes the Bank will raise interest rates further.

Europe is facing an energy crisis of geopolitical proportions which has sent energy costs soaring as well as the prospect of rationing gas this winter and already-increasing prices due to inflation. All this could spell the beginning of a recession in the Eurozone.

"Price pressures have continued to strengthen and broaden across the economy and inflation may rise further in the near term," the ECB said in a statement.

The ECB’s Governing Council said that it “expects to raise interest rates further” to battle inflation.

The eurozone’s annual inflation rate rose to 9.1% in August, up from 8.9% the previous month. The ECB expects inflation will average 8.1% this year and 5.5% next year.  The central bank normally targets a medium-term inflation rate of 2%. This time last year, the eurozone's inflation stood at around 3%.

Luxembourg’s annual inflation stood at 6.8% in August according to Statec.

Policymakers had expected an increase between a 50 and a 75 basis-point, but another jump in both headline and underlying inflation resulted in the higher bump.

The euro had hit a fresh near 20 year low against the U.S. dollar this week, just below $0.99. It traded at almost exactly one-for-one with the dollar on Thursday.

Some policymakers are now openly talking about a recession and the ECB's projections show sharply lower growth in the coming years.

The bank sees the eurozone economy expanding by 3.1% this year and 0.9% in 2023, a sharp downgrade from the 2.1% it expected in June.

ECB President Christine Lagarde gave a news conference, highlighting the importance of returning down to the target of 2% inflation.

She said that she expects things to get more difficult before the end of the year, predicting further increases in food and energy prices.

However, she said that if energy costs were to decline, or demand to lower it could lower pressure on prices.

The Press conference is still going on.