The ECB increases interest rates to 4.25%. Euro exchange rate falls a little.July 27, 2023
Euro exchange rate remains stable
The weak movements in the euro exchange rate after the announcement are due to the fact that this decision was expected. It is already the ninth interest rate hike in the last 12 months and was announced by the head of the ECB during the central bank conference in Portugal.
Continuity in interest rate policy
The European Central Bank is thus following the previous policy and yesterday's decision by the FED, which also announced an interest rate hike of 0.25%. The ultimate goal of this policy is to combat inflation, which remains at a high level. Like other central banks, the ECB's inflation target is 2%.
Inflation still high
Despite the many interest rate hikes, inflation remains at a high level. It is to be expected that this will remain the case in the short to medium term. Although the high energy prices have fallen in the meantime, the high food prices remain the main driver of the current inflation.