(MENAFN) The European Central Bank (ECB) has increased its policy rate by 50 basis points to 3.5 percent on Thursday, marking the sixth consecutive interest rate hike since July 2022. The move comes amid concerns about inflation and the need to maintain price stability in the eurozone. In a statement, the central bank said that inflation is projected to remain too high for too long, and that the increase in the policy rate is necessary to address this issue.
The ECB also announced that the asset purchase program portfolio is declining at a measured and predictable pace. The decline will amount to €15 billion (USD15.9 billion) per month on average until the end of June 2023, and its subsequent pace will be determined over time. This move is aimed at reducing monetary stimulus in the eurozone and maintaining price stability.
In addition, the ECB will continue applying flexibility in reinvesting redemptions coming due in the pandemic emergency purchase program portfolio. This is in order to counter risks to the monetary policy transmission mechanism related to the pandemic. The pandemic has had a significant impact on the global economy, and central banks around the world have implemented various measures to mitigate the economic fallout.
The ECB's decision to raise the policy rate has been met with mixed reactions. Some analysts argue that the increase is necessary to address inflation and maintain price stability, while others warn that it could have a negative impact on the eurozone economy. The move also puts pressure on other central banks, such as the US Federal Reserve, to follow suit and raise interest rates.
The ECB's decision reflects its commitment to maintaining price stability in the eurozone and addressing concerns about inflation. The move is part of a broader effort to reduce monetary stimulus and normalize monetary policy in the region. The ECB will continue to closely monitor economic developments in the eurozone and adjust its policy accordingly. The central bank's actions will have a significant impact on the region's economy and the global financial system as a whole.
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