First European Central Bank Rate Hike in Eleven Years


The European Central Bank announced an historical rate hike Thursday. Interest rates in the Eurozone rose by 50 basis points after the body had pursued a zero-interest policy for six years and last hiked rates eleven years ago. The main refinancing operations rate, which provides the bulk of liquidity to Eurozone banks, rose to 0.5 percent, while the deposit facility rate rose to 0 percent and the overnight lending rate to 0.75 percent.

With this, Europe’s central bank is a relative latecomer to 2022 rate hikes, as interest rates in the U.S. and the UK have already seen quite aggressive and repeated hikes over the past months in order to combat inflation that spun out of control following the coronavirus pandemic and the Russian invasion of Ukraine. The EU had originally applied its no-interest policy to invigorate the economy and understandably stuck with that approach during the coronavirus outbreak. U.S. and UK banks had already departed from the Recession-era policy by that time, which gave them the advantage to being able to give their markets an additional push as they were able to cut rates once more in 2020.

The Japanese Central Bank, which started applying a zero-interest strategy even earlier during the 1990s asset bubble, has stuck with the policy even more fervently and even switched to a negative interest policy by 2016 as the country is battling chronic economic growth and deflation issues. Since this also means Japan has not been affected by global inflation woes as much as other nations, the Bank of Japan as of Thursday did not see any reasons for hiking rates in the near future.

Infographic: First European Central Bank Rate Hike in Eleven Years | Statista