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- The European Central Bank (ECB) expressed worries regarding sustained high inflation.
- Starting on June 21, 2023, these new rates will be in effect.
On Thursday, the European Central Bank (ECB) declared a 25 basis point rise to its key interest rate, which is one of three principal rates established by the ECB. Following the decision made by the bank’s Governing Council, the interest rates on the bank’s main refinancing operations, marginal lending facility, and deposit facility will be increased to 4.00%, 4.25%, and 3.50%, respectively.
Starting on June 21, 2023, these new rates will take effect. This comes after a decline in the cryptocurrency market triggered by the Federal Reserve’s remarks about a potential rate increase later in 2023. In contrast to the ECB, the Fed opted to halt the interest rate hike for the time being.
Combating Sustained Inflation
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The European Central Bank (ECB) pointed to concerns regarding prolonged high inflation as the basis for its choice to elevate interest rates. Bitcoin’s value rose on Thursday after experiencing a 4.19 percent decrease in the previous 24 hours in reaction to the European Central Bank’s rate hike. Nevertheless, the bears managed to regain control once again.
Positive responses in the cryptocurrency market followed a similar action by the European Central Bank during its May 2023 meeting. The Governing Council of the European Central Bank anticipates that inflation will decrease over the next two years.
In an official statement, the ECB Council mentioned:
“According to the June macroeconomic projections, Eurosystem staff predict headline inflation to average 5.4% in 2023, 3.0% in 2024, and 2.2% in 2025. Indicators of underlying price pressures remain robust, although some indicate tentative signs of easing.”
To achieve its medium-term objective of reducing inflation to 2%, the ECB has stated that it will maintain a sufficiently restrictive stance moving forward.
