ECB increases key interest rates by 50 basis points

By Gokhan Ergocun

ISTANBUL (AA) - The European Central Bank on Thursday increased its key interest rates by 50 basis points.

The rates on the main refinancing operations, the marginal lending facility and the deposit facility rose to 2.5%, 2.75% and 2%, respectively.

Interest rates have to be increased to bring back the inflation rate to the medium-term target of 2%, the bank's governing council believed.

The bank also discussed the normalization process of the Eurosystem’s monetary policy and decided to decrease the asset purchase program as of March 2023.

The bank's inflation expectations are 8.4% for 2022, 6.3% for 2023, 3.4% for 2024 and 2.3% for 2025 in the euro area.

It is also forecast that the eurozone economy will contract in the current and next quarters due to the energy crisis, global uncertainties, weaker global economy and tightening financing conditions.

"Overall, the Eurosystem staff projections now see the economy growing by 3.4% in 2022, 0.5% in 2023, 1.9% in 2024 and 1.8% in 2025."