European Central Bank unprecedentedly hikes Interest Rates by 0.75%

Brussels: Due to flaring inflation and declining productivity, the European continent is predicted to be hit by the economic recession. Despite this threat of recession, the European Central Bank, the central bank of the European Union, has increased the interest rate by an unprecedented 0.75%. The impact of this interest rate hike has started to be felt in the European stock markets, and it is reported that the leading indices have begun to fall. The coronavirus pandemic, problems in the global supply chain and the Russia-Ukraine conflict have severely affected the European economy. The Union had announced massive financial assistance to overcome the Coronavirus pandemic and supply chain crisis. There were hopes that the economy would recover due to this. But the situation has started to worsen in the background of the Russia-Ukraine conflict.

The sanctions imposed on Russia and Russia’s retaliatory response of blocking fuel supply have pushed fuel and electricity rates to record levels in Europe. The rise in fuel prices has also affected other products, and the inflation index in Europe has reached nine per cent. It is likely to increase more in the coming times, and time has occurred for the European people with the rationing of fuel and electricity. It has also been predicted that parts of Europe are feared to freeze if enough fuel is available.

All these effects have started to be seen in the European economy. Besides, the leading economies like Germany, France and Italy have begun to slow down. These countries’ manufacturing and service sectors have been hit hard, and indices in these sectors have fallen to the lowest levels. The German economy will go into recession from this quarter, economists and government agencies in this country have given clear indications. Analysts and financial institutions in the US and other countries also confirmed it. It is said that since Germany is the leading European economy, its repercussions will be felt in other European countries.

Against this background of a possible European recession, the European Central Bank’s interest rate increase becomes noteworthy. The bank said this increase is being done to prevent rising inflation in European countries. Following the interest rate, the refinancing rates have also increased to 1.25%. This is the highest interest rate since 2011. The bank said in its statement that this hike has begun, and the interest rates will be increased further in the next few months.