To rein in the ongoing price increases, the European Central Bank is raising the interest rate by 0.25 percentage points to 4 percent. This marks the tenth increase in just over a year, which has never happened before.
This concerns the interest rate that banks receive when they deposit money with the ECB. The idea is that if banks themselves receive higher interest rates, they will also raise interest rates for consumers and businesses. As a result, consumers and businesses are likely to spend and borrow less, which should curb inflation.
So far, this hasn’t been very successful. Prices in the eurozone were 5.3 percent higher last month compared to a year earlier. Prices are also continuing to rise in the Netherlands, although at a slower pace than last year. However, it’s important to note that the effects of higher interest rates often become visible only after some time.
Prior to this, there was debate among experts about whether the ECB would announce another increase on Thursday. While inflation has not yet returned to the desired level of 2 percent, the economy has been suffering from all these rate hikes.