European Central Bank opts for historic rate hike amid surging inflation

By Aysu Bicer

ANKARA (AA) - The European Central Bank (ECB) on Thursday hiked its three key rates by 75 basis points in a historic move as eurozone inflation faces a record-high and war-driven energy crisis, creating new risks for the entire region.

"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 1.25%, 1.50% and 0.75% respectively," it said in a statement.

This was the first time in over a decade that the bank raised rates in July by 50 basis points as annual inflation in the euro area spiked to 8.6% in June, far above the ECB's 2% inflation target.

Euro area annual consumer inflation jumped to a new record high of 9.1% in August.

Now amid the energy crisis and lingering impacts of the pandemic, the bank signaled further interest rate increases in coming period, as "inflation remains far too high, likely to stay above target for extended period."

Markedly revising up inflation projections, it now expects an 8.1% average in 2022 and 5.5% in 2023.

The bank also raised its eurozone growth forecast to 3.1% in 2022, while diminishing it to 0.9% in 2023 and to 1.9% in 2024.