European Central Bank hikes rates to highest in more than decade

European Central Bank hikes rates to highest in more than decade

Bank raises three key interest rates by 75 basis points to tackle record euro-zone inflation

By Aysu Bicer

ANKARA (AA) - The European Central Bank on Thursday hiked rates by 75-basis-points, a third major increase in a row, bringing borrowing costs to the highest in more than a decade to tackle record euro-zone inflation.

"Inflation remains far too high and will stay above the target for an extended period," according to a statement by the bank.

In September, euro area inflation hit 9.9%, with soaring energy and food prices, supply bottlenecks and the post-pandemic recovery in demand causing price pressures.

"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 Nov. 2022," it said.

The bank also announced it was changing the terms and conditions of its targeted longer-term refinancing operations, or TLTROs — an instrument that enables European banks with attractive borrowing conditions, formed to incentivise lending to the real economy.

"The Governing Council ... decided to adjust the interest rates applicable to TLTRO III from 23 November 2022 and to offer banks additional voluntary early repayment dates," the ECB said.

"In order to align the remuneration of minimum reserves held by credit institutions with the Eurosystem more closely with money market conditions, the Governing Council decided to set the remuneration of minimum reserves at the ECB’s deposit facility rate," the bank said.

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