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ECB Raises Key Interest Rate to 4.0% Amid Economic Slowdown

ECB Raises Key Interest Rate to 4.0% Amid Economic Slowdown

The European Central Bank (ECB) announced on Thursday that it has raised its key interest rate to a record 4.0%. This decision, made amidst substantial uncertainty as the economy slows, marks the tenth hike in a 14-month effort aimed at tackling an inflation level above 5%. The move received strong backing from the majority of the Governing Council.

The ECB’s policymakers, using model-based simulations and expert surveys, proposed maintaining a deposit facility rate between 3.75% and 4.00% for the long term. This strategy is intended to reduce inflation to 2%, aligning with the central bank’s target.

In the backdrop of this decision, long-term bond yields have seen a significant increase as central banks around the globe reduce or cease purchases. This trend has been partly offset by slightly eased borrowing costs, a result of Federal Reserve officials downplaying further rate hikes.

The global financial landscape is also being impacted by geopolitical tensions, with concerns over the escalating Israel-Hamas conflict affecting major borrowers such as Italy. Despite these challenges, the ECB’s latest move indicates its determination to curb high inflation rates and stabilize the European economy.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Source: Investing.com

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