ECB Breaks Negative Interest Rate Policy Streak, Raises Interest Rates: What It Means

For the first time in over a decade, the European Central Bank (ECB) has shifted its monetary policy, marking a significant turning point for the Eurozone economy. One, the ECB finally exited its Negative Interest Rate Policy (NIRP) by hiking all its policy rates by 50 basis points, including its deposit rate, which was the negative rate. This bold move signals a commitment to tackling rising inflation, but what does it mean for you?

JUST IN: 🇪🇺 The European Central Bank raised interest rates by 0.5%, the first increase in 11 years. The interest rate hike was unexpected and was announced on Thursday. This increase ends a period of unprecedented monetary easing, where negative interest rates were used to stimulate economic growth.

At the onset of the financial crisis, the European Central Bank (ECB) began to lower its three key interest rates (click here for the time series). The deposit facility rate, which constitutes a floor, reached negative territory, impacting banks and savers alike. After years of this unconventional policy, the ECB's decision to raise rates reflects a growing concern about inflation outpacing economic growth.

While the ECB raised interest rates initially, the trend has not been consistently upwards. The European Central Bank left interest rates unchanged as expected today, snapping an unprecedented streak of ten consecutive rate hikes, and maintained its guidance. This pause indicates a careful balancing act between controlling inflation and preventing a recession.

Looking ahead, the future direction of ECB policy remains uncertain. Hace 2 días The European Central Bank will almost certainly cut interest rates on June 5, with a more than 70% majority of economists polled by Reuters expecting policymakers to pause for thought.

Stay tuned for updates and expert analysis on how the ECB's interest rate decisions will impact your finances.