ECB announced to raise the three key interest rates by 50bps today. The main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 0.50%, 0.75% and 0.00% respectively, with effect from 27 July 2022.
The “larger first step” in policy normalization was based on the “updated assessment of inflation risks and the reinforced support provided by the TPI for the effective transmission of monetary policy.” The “frontloading” of exit from negative deposit rate ” allows the Governing Council to make a transition to a meeting-by-meeting approach to interest rate decisions.” Future policy path will continue to be “data-dependent”.
Also, the Governing Council approved the Transmission Protection Instrument (TPI), to “ensure that the monetary policy stance is transmitted smoothly across all euro area countries”.
