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The European Central Bank (ECB) raised its key interest rates by 25 basis points, slowing the pace from previous increases. However, as inflation in the euro area remains persistently high, future rate hikes may still be expected with the regulator insisting it will continue to seek a \u201ctimely return\u201d to its 2% inflation target and ECB president Christine Lagarde stating that rates are not \u201csufficiently restrictive\u201d yet. <\/strong><\/p>\n The Governing Council of the European Central Bank (ECB) decided to raise three key interest rates by 25 basis points (bps) on Thursday. While slowing the rate hikes, the monetary authority indicated that future increases are possible as its fight to tame inflation goes on.<\/p>\n \u201cThe inflation outlook continues to be too high for too long,\u201d the regulator highlighted in a press release after the council\u2019s meeting. It explained that while headline inflation has declined over recent months, underlying price pressures remain strong.<\/p>\n The interest rates on the main refinancing operations, the marginal lending facility, and the deposit facility will be increased to 3.75%, 4.00% and 3.25% respectively, from May 10, 2023, the announcement<\/a> detailed. The 25 bps raise to the policy rates is the smallest since hiking began in July 2022.<\/p>\n At the same time, the ECB emphasized that the council\u2019s future decisions will aim to ensure that \u201ca timely return of inflation to the 2% medium-term target\u201d is achieved. It also said that the \u201csufficiently restrictive\u201d levels will be maintained \u201cfor as long as necessary.\u201d<\/p>\n The slowdown in Europe follows the U.S. Federal Reserve\u2019s decision<\/a> to increase its benchmark interest rate by the same 25bps on Wednesday, with analysts interpreting the accompanying statements as hinting that this may be the last in the Fed\u2019s own series of hikes.<\/p>\n However, ECB President Christine Lagarde made it clear that European interest rates are not yet \u201csufficiently restrictive\u201d to bring inflation down. Speaking at a press conference after the Governing Council\u2019s meeting in Frankfurt, she stated:<\/p>\n We are not pausing \u2014 that is very clear. We know that we have more ground to cover.<\/p>\n<\/blockquote>\n Quoted by Reuters, she insisted that the ECB is \u201cnot Fed-dependent,\u201d dismissing the notion that if the U.S. pauses its rate hikes, the eurozone\u2019s monetary policy regulator would have to do the same. She highlighted the \u201csignificant upside risks\u201d to inflation that remain in the common currency area and admitted that some governors<\/a> were favoring a bigger rate hike.<\/p>\nECB Eases Pace of Hiking Interest Rates in the Eurozone<\/h2>\n
\u2018We Are Not Pausing, We Have More Ground to Cover,\u2019 ECB\u2019s Lagarde Insists<\/h2>\n
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