The European Central Bank raised its interest rates by a massive 75 basis points, the biggest hike ever in the single currency bloc's history, and signaled more tightening in the coming months as policymakers try to rein in runaway inflation in a bid to support a slowing economy.
"This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will support a timely return of inflation to our two percent medium-term target," ECB President Christine Lagarde said Thursday.
In the previous meetings, Lagarde had signaled at least a 50 basis point hike in September. However, inflation has been setting new records in the euro area and its member countries in recent months, thus raised the pressure on rate-setters to do more.
Runaway inflation has seen central banks across the world resort to aggressive tightening of monetary policy. The ECB's peer, the US Federal Reserve, has led the charge against ultra-high inflation that is mainly driven by higher energy prices.
The Governing Council, led by Lagarde, raised the main refinancing rate to 1.25 percent, the deposit facility rate to 0.75 percent and the marginal lending rate to 1.50 percent.
The move was in line with economists' expectations that were fueled by the recent hawkish rhetoric from some ECB policymakers favoring forceful action against high inflation.
by Jyotsna V
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