FOR THE FIRST TIME IN 11 YEARS, THE EUROZONE HIKES INTREST RATES

  • 22/07/2022

In an effort to rein in the spiralling inflation in the eurozone, the European Central Bank (ECB) increased interest rates for the first time in more than 11 years.

In order to prepare for further increases this year, the ECB raised its benchmark interest rate by 0.5 percentage points, to 0.0 percent.

Since 2014, the rate has been negative in an effort to revive the area's economy following several years of subpar expansion.

However, as a result of rising food, gasoline, and energy prices, consumer prices increased by a record 8.6 percent in the year to June.

That is significantly more than the bank's aim of 2%.

It follows rate increases by the Bank of England and US Federal Reserve in an effort to contain the price increase. 

Inflation is the pace at which prices are rising. For example, if a bottle of milk costs €1 and that rises by 5 cents compared with a year earlier, then milk inflation is 5%.

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