ECB raises benchmark rate by 75 basis points to 1.5%

The bank increased 3 key rates all by 75 basis points to 1.5%.

• This is as big an interest rate hike as the one we saw in September, when again the bank raised rates by 75 basis points.
• The Governing Council took today’s decision, and expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target.
• Some political leaders warn that tighter monetary policy risks slashing hopes of growth.

Europe continues to face an energy crisis of geopolitical proportions with energy costs soaring and a likely recession in the Eurozone in 2023.
The rate increases announced on Thursday, were in line with market expectations. The move shows that the Governing Council is not ready to stop the level of monetary tightening despite mounting political criticism.

Italy’s new PM Giorgia Meloni had criticised potential rate increases earlier this week. Her remarks nearly echoed those of France’s president Emmanuel Macron, who had shared that he was worried about central banks “smashing demand” in their efforts to tackle inflation, now at a record high of 9.9%.

European Central Bank President Christine Lagarde pushed back against criticism from European leaders, saying fast rate hikes were the "most appropriate" way to bring down inflation and encourage economic recovery.

The ECB had a "mandate" to tame inflation, Lagarde said, after critical statements by French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni.

"The decision that we made today is the most appropriate in order to restore price stability, which, as you know well, is critically important for not just the stability of prices but also for the economy to actually prosper and recover," she said.

40.8% RISE IN ENERGY PRICES: Eurozone inflation jumps by record rate

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

The Governing Council decided to raise the three key ECB interest rates by 75 basis points. Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 2.00%, 2.25% and 1.50% respectively, with effect from 2 November 2022.

Luxembourg’s annual inflation rate rose to 6.9% in September according to STATEC.

Press Conference has concluded.

Asked about whether interest rates will peak at 3% next year Lagarde answered "we have made progress but we haven't completed the job of completing our monetary policy" adding that "we will pursue rate increases meeting by meeting". The President of the ECB confirmed future rate increases in the Press Conference.

According to AFP, the European Central Bank has urged governments to stay "committed" to reducing public debt.

AFP's Jean-Philippe Lacour prepared some questions and answers that contextualise the situation that the ECB was and is facing, read below: