The European Central Bank (ECB) has increased interest rates for the 10th consecutive time, setting a new record high at 4% from the previous 3.75%. This move is driven by concerns over persistently high inflation levels, projected to average 5.6% in 2023.

The ECB suggests this rate hike may be the last for now. The bank expects inflation in the Eurozone to decline to approximately 2.9% next year and 2.2% by 2025.

Rising food and energy prices have been affecting household budgets across the Eurozone, prompting central banks to raise interest rates in an effort to curb inflation, although this must be balanced to avoid causing a recession. Despite these rate hikes, the ECB has lowered its economic growth projections due to their impact, with some economists suggesting that further rate increases are unlikely in the near term.

ECB President Christine Lagarde left open the possibility of future rate hikes but emphasized that the focus would shift to the duration. The Eurozone experienced a recession in the previous winter, partly driven by revised data from Germany, Europe's largest economy, contributing to the economic downturn. A recession, defined as two consecutive quarters of economic contraction, can have adverse effects on businesses and lead to job losses.

Source: BBC News, available at