European Central Bank Raises Interest Rates After 11 Years, By More Than Expected

The European Central Bank (ECB) raised its benchmark deposit rate by 50 basis points to 0%, breaking its earlier guidance for a 25 basis point move as it joins global peers to curb record-high inflation in the eurozone.
It was the eurozone central bank's first rate hike for 11 years.
The central bank also raised the rate on its weekly and daily cash auctions by 50 basis points to 0.50% and 0.75%, respectively, and signaled that further increases in its three rates were likely to come this year.
"At the Governing Council's upcoming meetings, further normalization of interest rates will be appropriate," the ECB said. "The frontloading today of the exit from negative interest rates allows the Governing Council to make a transition to a meeting-by-meeting approach to interest rate decisions."
The ECB also approved a new tool, the Transmission Protection Instrument (TPI), to cushion the increasing borrowing costs.
"TPI can be activated to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across the euro area," ECB said.
"The scale of TPI purchases depends on the severity of the risks facing policy transmission. Purchases are not restricted ex-ante," the ECB said.
Photo via Wikimedia Commons