ECB Raises Key Rate for Second Time This Year... Deposit Rate Set at 2.50%
0.5 Percentage Point Gap With South Korea's Base Rate
The European Central Bank (ECB) has raised its key interest rates for the second time this year. In response to rising inflation, including higher energy prices, the bank raised its three main policy rates by 0.25 percentage points each.
On September 10, local time, the ECB announced after its monetary policy meeting in Berlin, Germany, that it had decided to raise the deposit rate to 2.50% per year. The main refinancing rate and the marginal lending facility rate were also increased by 0.25 percentage points each, to 2.65% and 2.90%, respectively.
With this increase, the gap between the ECB deposit rate and South Korea's base interest rate (3.00%) stands at 0.50 percentage points, while the gap with the U.S. federal funds rate (3.50–3.75%) is now 1.00 to 1.25 percentage points.
This policy rate hike by the ECB is the second since the outbreak of the war in Iran at the end of February. In June, the ECB raised rates for the first time since September 2023. The current deposit rate of 2.50% is the highest since April of last year.
Last month, the eurozone (21 countries using the euro) consumer price inflation rate rose to 3.3%, the highest in three years. This marks the sixth consecutive month that the figure has exceeded the ECB's target of 2%. The spike is due to surging energy prices, driven by the impact of the war in the Middle East.
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In its statement, the ECB said, "The outlook remains highly uncertain, with upside risks to inflation and downside risks to economic growth."
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