ECB raises key rates by 25 bps

FRANKFURT - The European Central Bank on Thursday announced a new interest rate increase of 25 basis points (bps), continuing its rate-hiking spree aimed at curbing inflation.

The interest rates on the main refinancing operations, the marginal lending facility, and the deposit facility will now be 4 percent, 4.25 percent, and 3.5 percent, respectively.

The bank has now raised its rates for the eighth time in a row. The deposit interest rate has been pushed up to its second-highest level in the ECB's history, close to the historic high of 3.75 percent, which was last seen in October 2000.

"Inflation has been coming down but is projected to remain too high for too long," ECB President Christine Lagarde said in a statement.

According to its June projections, the central bank expects headline inflation to an average of 5.4 percent in 2023, 3 percent in 2024, and 2.2 percent in 2025.

"We are determined to ensure that inflation returns to our 2 percent medium-term target in a timely manner," Lagarde said.

According to her, the rate hikes work in bringing down inflation, which dropped in the eurozone from 7 percent in April to 6.1 percent in May.

The rate hikes are weighing on the financial markets, which have seen borrowing costs soar steeply and growth in loans slow, according to the ECB.

The ECB expects the eurozone economy to grow by 0.9 percent in 2023, 1.5 percent in 2024, and 1.6 percent in 2025.