European Central Bank - cropped for FB

The European Central Bank (ECB) raised interest rates by 25 basis points on Thursday (today). The interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility will go up to 3.75 per cent, four per cent and 3.25 per cent respectively with effect from 10th May 2023. Parallel to this, the ECB governing council will keep unwinding the asset purchase programme (APP) at a “measured and predictable pace.”

The ECB emphasized in its press release that the inflation outlook continues to be “too high for too long.” The raise is thus in line with its policy to restore the inflation rate back to two per cent – a level considered best to maintain price stability. 

“We are not pausing – that is very clear,” ECB President Christine Lagarde told a press conference. “We know that we have more ground to cover.”

In its Winter 2023 interim economic forecast published on February 2023 the European Commission had lowered projections for inflation  to 5.6 per cent for the Euro Area yet Eurostat data showed  that as of 2nd May 2023 inflation was still hovering at around seven per cent.

Christine Lagarde - Facebook photo
European Central Bank President Christine Lagarde

This raise forms part of a series of a larger-than-usual upward adjustments that started on 22nd July 2022.  Back then, the ECB decided to push up the main rate from -0.5 per cent to zero per cent citing “very high energy prices” as the main reason. Supply bottlenecks, higher demand and a lower exchange rate also contributed to this as they brought about a higher level of uncertainty across many parts of the Eurozone.

The ECB noted that “the past rate increases are being transmitted forcefully to euro area financing and monetary conditions,” however it also acknowledged that “the lags and strength of transmission to the real economy remain uncertain.”

Despite record-breaking rate of inbound tourists, local spending does not match the influx

September 24, 2023
by Andre Delicata

Boosting heads in beds, does not correlate with an improvement in quality.

€10m Venture Capital Fund launched to help start-ups

September 19, 2023
by Andre Delicata

Government-backed Venture Capital Fund aimed to aid innovation

Maltese banks can withstand ‘extreme stress’, including bank runs – Central Bank of Malta

September 19, 2023
by Robert Fenech

Maltese banks’ liquidity, resilience remains high but high exposure to real estate a concern