The European Central Bank (ECB) raised interest rates for the first time in almost a decade on Thursday, despite concerns from the banking sector that it could have a negative impact on their businesses. The benchmark rate was raised from 0.00% to 0.25%, marking the first increase since July 2011.
The move was widely expected as the ECB looks to normalize monetary policy after years of ultra-low rates in an effort to stimulate economic growth.
The decision was met with criticism from some in the banking sector, who argued that higher rates could squeeze profits, put pressure on loan profitability and make it harder for banks to raise capital.
At the same time, the ECB maintained its commitment to provide continued stimulus to the economy through its asset purchase program. This should help to offset the impact of the rate hike on banks.
The ECB’s decision is likely to be followed by other central banks in the coming months as they also look to normalize monetary policy.
