The European Central Bank piled on another outsized interest rate hike aimed at squelching out-of-control inflation, increasing rates Thursday at the fastest pace in the euro currency's history and raising questions about how far the bank intends to go with a recession looming over the economy.
The 25-member governing council raised its interest rate benchmarks by three-quarters of a percentage point at a meeting in Frankfurt, matching its record increase from last month and joining the U.S. Federal Reserve in making a series of rapid hikes to tackle soaring consumer prices.
Central banks around the world are rapidly raising interest rates that steer the cost of credit for businesses and consumers. Their goal is to halt galloping inflation fuelled by high energy prices, post-pandemic supply bottlenecks, and reviving demand for goods and services after COVID-19 restrictions eased. The Fed raised rates by three-quarters of a point for the third straight time last month.
Inflation robs consumers of purchasing power, leading many economists to pencil in a recession for the end of this year and the beginning of next year in both the U.S. and the 19 countries that use the euro as their currency. Analysts at UniCredit said Lagarde was not likely to provide clues about the peak level of rates but "we suspect that she will drop hints pointing to an increasing likelihood that rates will have to be raised into restrictive territory, and a slower pace of hikes following today's bold move."