The European Central Bank recently decided to raise interest rates by 0.75%. This is the third consecutive increase (a 2% increase overall), and the base rate will now be 2%. The interest rate at which banks accept deposits has risen from 0.75% to 1.5%.
At the same time, the Governing Council decided today to take the first steps toward reducing the ECB's balance sheet, which has surpassed 8.8 trillion euros as a result of recent quantitative easing and cheap liquidity programs for banks.
The Governing Council took today's decision and expects to raise interest rates further to ensure a timely return of inflation to the medium-term target of 2%, as stated in the decision. Following its approach at each meeting, the Governing Council will base the future path of interest rates on the evolving outlook for inflation and the economy.
Simultaneously, the ECB decided to alter the terms and conditions for providing low-cost liquidity to banks via the LTROiii mechanism.
[This article was translated from its Greek original]