FRANKFURT — The European Central Bank raised interest rates by 75 basis points and signaled further tightening ahead as it fights record inflation that is rapidly eroding consumer spending power across the region.

“The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 2.00 percent, 2.25 percent and 1.50 percent respectively,” the ECB said in a statement Thursday.

The central bank had been widely expected to deliver another jumbo rate hike as it marches ahead on its fastest tightening cycle on record. The ECB raised rates by a total of 2 percent over the last three meetings to take them to the highest level since 2009.

The ECB will also offer banks additional voluntary early repayment dates.

In addition, the ECB will also reduce the remuneration of minimum reserves held by credit institutions, that is the liquidity banks are required to hold, to align them more closely with money market conditions. In future, it will apply the deposit rate rather than the refinancing rate to those funds. 

The statement did not offer any hint on when the ECB might start to reduce its massive bond holdings by phasing out reinvestments.

Source: POLITICO