European Central Bank Raises Rates for a 10th Time

The European Central Bank on Thursday raised interest rates for a 10th consecutive time in an effort to force inflation down.

The bank lifted its three key interest rates by a quarter of a percentage point, raising the deposit rate to 4 percent, the highest in the central bank’s two-decade history.

“Inflation continues to decline but is still expected to remain too high for too long,” the central bank said in a statement. It increased rates to “to reinforce progress” on lowering inflation.

Thursday’s decision was seen as almost a coin toss, as the policymakers weighed how much progress had been made on lowering inflation against their determination not to declare victory too early. This week, analysts were evenly split on whether policymakers would raise interest rates again or pause. As the meeting approached, bets by investors in financial markets tilted toward a slightly higher chance that the bank would raise rates.

Inflation in the eurozone has slowed meaningfully from its double-digit peak last year. But it is still too high for the region’s policymakers, who are tasked with returning the inflation rate to 2 percent. Consumer prices rose 5.3 percent in August compared with a year earlier, the same pace as the previous month and defying economists’ expectations for a slowdown because of a jump in fuel prices. At the same time, domestic inflationary pressures, which policymakers are watching closely, were still strong. Core inflation, which strips out food and energy prices, was 5.3 percent.

The central bank predicts inflation will still just above the target in 2025 and so policymakers have tried to lay the ground for a long period of high interest rates that would restrain the economy further. Already, demand for loans has weakened and banks are tightening their lending standards.