European Central Bank to hike interest rates for first time in 11 Years

The European Central Bank (ECB) will raise interest rates for the first time in 11 years next month and again in September, catching up with other central banks across the world as they shift their focus from helping the economy during the COVID-19 pandemic to containing skyrocketing inflation.  ECB President Christine Lagarde said, the hike will be of 0.25 percentage points and will take place in July. The bank also intends to end its bond-buying stimulus programme on 1st of July. The bank said, the ECB's main policy interest rate is currently at -0.50 per cent and it could be back at zero or above by the end of September. The last time it raised interest rates in the eurozone was in 2011.

Inflation has become a "major problem," according to the bank's 25-member monetary policy council, which convened in Amsterdam. In May, consumer prices increased by an all-time high of 8.1%. The bank's goal is to achieve a 2% growth rate. The ECB will halt its bond purchases, which have been boosting the economy, before raising rates by a quarter-point in July. It left open the prospect of a half-percentage-point hike in September, saying that if the inflation outlook remains unchanged or worsens, "a greater step will be justified.". The ECB also cut its growth forecast for the eurozone from 3.7 per cent to 2.8 per cent for 2022 and from 2.8 per cent to 2.1 per cent for 2023. Several other central banks have already started raising interest rates as they try to slow inflation that has been accelerating amid surging energy costs.