The Governing Council decided today to raise three representative ECB interest rates by 75 basis points, the institution said on Thursday. Thus, the ECB wants to bring the level of inflation in the Eurozone to 2% in the medium term, while fearing a recession. This is the second increase that the ECB has carried out after more than a decade. h2: For Romanians who borrow in euros with variable interest rates, this will lead to higher rates. “Today’s decision by the Governing Council, as well as the expectation of further interest rate hikes, is motivated by the fact that inflation remains at too high levels and is likely to remain above the target for a long time,” the ECB said in a statement. According to Eurostat’s preliminary estimate, inflation reached 9.1% in August. After the recovery recorded in the first half of 2022, the latest data points to a significant slowdown in economic growth in the Eurozone, with the economy expected to stagnate at the end of the year and in the first quarter of 2023. Very high energy prices reduce the purchasing power of people’s incomes, and although supply bottlenecks are decreasing, they are still holding back economic activity. In addition, the unfavorable geopolitical situation, especially Russia’s unjustified aggression against Ukraine, affects corporate and consumer confidence. These projections are reflected in the latest expert growth forecasts, which have been significantly revised downward for the remainder of this year and through the end of 2023. Experts currently expect economic growth of 3.1% in 2022, 0.9% in 2023 and 1.9% in 2024. The continued vulnerability caused by the pandemic remains a risk to the smooth transmission of monetary policy. As such, the Board of Governors will continue to take a flexible approach to reinvesting maturing purchased bonds into the Pandemic Emergency Purchase Program portfolio to counter pandemic risks to the transmission mechanism. h2: ECB’s key interest rates The Governing Council decided to increase the ECB’s three key interest rates by 75 basis points. Accordingly, from September 14, 2022, the interest rate on the main refinancing operations and the interest rates on the marginal lending line and the deposit line will increase to 1.25%, 1.50% and 0.75%, respectively. As a result of the increase to a level above the zero interest rate on the deposit line, the two-tier system of remuneration for excess reserves is no longer necessary. Therefore, the Board of Governors decided today to suspend this system by setting the multiplier to zero. Asset Purchase Program and Pandemic Emergency Program The Governing Council intends to continue to reinvest the entire principal amount of securities purchased under the asset purchase program (APP) for an extended period after the date on which it initiates an increase in the ECB’s representative interest rates. and, in any case, as long as it is necessary to maintain significant amounts of liquidity and appropriate monetary policy. With respect to the Pandemic Emergency Purchase Program (PEPP), the Board of Governors intends to reinvest the principal amount of maturing securities purchased under the program until at least the end of 2024. In any case, future reductions in the PEPP portfolio will be managed in this way. a way to avoid intervention in the relevant monetary policy. Redemptions within the PEPP portfolio are reinvested in a flexible way to counter pandemic risks for the monetary policy transmission mechanism. Refinancing operations The Governing Council will continue to monitor bank funding conditions and ensure that the maturity of operations under the third round of targeted long-term refinancing operations (OTRTL III) does not affect the smooth transmission of its monetary policy. The Governing Council will also periodically assess how targeted lending operations contribute to its monetary policy. *** The Governing Council is ready to adjust all its instruments within its mandate to ensure that inflation stabilizes at 2% over the medium term. The Transmission Protection Instrument (TPI) is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across the euro area, enabling the Governing Council to more effectively implement its price stability mandate.