European Central Bank has voted to lift borrowing costs across the eurozone.
The ECB’s governing council has voted to raise the three key ECB interest rates by 25 basis points, or a quarter of one percent.
Announcing the move, it says:
Inflation has been coming down but is projected to remain too high for too long. The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner.
Eurozone inflation was recorded at 6.1% in the year to May, down from 7.0% in April, so three times higher than its target.
Today’s changes mean that the interest rate on ECB’s main refinancing operations will rise to 4%.
The marginal lending facility (used by commercial banks for short-term borrowing from the ECB) rises to 4.25%, while the deposit facility rate (paid on commercial bank deposits left at the ECB) rises to 3.5%.
Former Bank of England governor Mark Carney has warned that governments will be paying higher rates of interest for their debt for the foreseeable future, and that mortgage holders should adjust to this new situation.
Carney told ITV’s Robert Peston:
If you have still a few years of low interest rates on your mortgage, if you fixed just at the right time as it turned out, recognise that there will be ann adjustment over the medium term.
It’s a question of degree but the direction is very clear.
The turbulence in the mortgage market has continued, with Nationwide lifting its fixed-term mortgage rates from tomorrow….
…and average rates across the market increasing again.
In the eurozone, the European Central Bank has lifted its key interest rates by a quarter of one percent.
The ECB warned that inflation is projected to remain too high for too long, as it lifted its forecasts for price rises over the next few years.
ECB president Christine Lagarde indicated that eurozone interest rates will be lifted in July too, saying:
“Are we done? Have we finished the journey? No. We’re not at our destination.
Do we still have ground to cover? Yes, we still have ground to cover.
And in other news:
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— James Picerno (@jpicerno) June 15, 2023