With the sixth interest rate hike in a row, the ECB is bracing itself against the persistently high inflation in the common currency area. It raised the key interest rate again on Thursday by 0.50 percentage points to 3.5 percent.
Despite the uncertainty in the banking sector after the collapse of several smaller US banks and concerns about the major Swiss bank Credit Suisse, the ECB stuck to its interest rate policy. The ECB stressed: “The euro area banking sector is resilient: capital and liquidity positions are sound.”
It has set the goal for the euro area of reducing inflation to two percent in the medium term. She’s a long way from that. Inflation has eased in recent months, but only slowly of late. In February, the inflation rate in the euro area was 8.5 percent.
Above all, high energy and food prices are fueling inflation. Higher inflation rates reduce the purchasing power of consumers. However, rising interest rates can counteract high inflation rates because loans become more expensive and this slows down demand.
However, rising interest rates can put banks under pressure, as the collapse of the Silicon Valley Bank (SVB) in the USA showed. However, experts consider a global financial crisis like that of 2008 to be unlikely.
https://exxpress.at/rekordinflation-nationalbank-chef-rechnet-mit-weiteren-ezb-zinserhoehungen/
https://exxpress.at/trotz-rueckgang-ezb-direktorin-sieht-bei-inflation-kein-zeichen-fuer-entwarnung/