The European Central Bank (ECB) has raised interest rates in an attempt to slow down the pace of inflation in the eurozone. Recently, inflation in the eurozone rose at an annual rate of 7%, far above the ECB’s target rate of 2%. As a result, the ECB raised its key deposit rate, which determines how much interest it pays on deposits, to 3.25% from 3%, and lifted its main refinancing rate, which banks pay when they borrow money from the ECB, to 3.75% from 3.5%.

Unlike the US Federal Reserve, the ECB did not suggest that it might have concluded with rate increases for the time being. ECB President, Christine Lagarde, said the inflation outlook “continues to be too high for too long”, and that the bank is not pausing. In the meantime, ECB’s rate hikes, along with the US Fed’s increases, have caused a sharp rise in borrowing costs, leading to a slowdown in sectors such as housing and playing a part in the recent collapses of three US banks. Nonetheless, the central banks believe that the increase in costs will lessen demand and stabilize prices.