The European Central Bank (ECB) threw a stone into the pond by deciding Thursday to raise its three key rates by 50 basis points after having prepared the spirits for an increase of only 25 points.

A first in more than ten years for the Frankfurt institution caught in a complex arbitration between rising prices and fears for growth.

The main interest rate thus goes from zero, the level where it has been camped since 2016, to 0.50%, while that taxing part of the bank liquidities not distributed in credit, goes up from -0.50% to zero.

This decision marks the end of the era of negative interest rates that began in 2014 and the end of a decade of generous monetary policy that helped the economy overcome the crises of recent years.

Reduce the money supply in circulation to curb inflation

This tightening of monetary policy had already begun in July with the halt to new debt purchases on the markets.

Objective: reduce the money supply in circulation and curb inflation, which last month broke a new record in the euro zone, at 8.6% over one year.

The ECB's task is complex due to the growing threats of cuts in Russian gas supplies, the risk posed by the political crisis in Italy and the fall of the euro.

A new instrument to protect States

To ward off the specter of a new sovereign debt crisis, the European Central Bank also announced on Thursday a new instrument to protect the most fragile states against speculative attacks.

The latter was designed to smooth out the gaps between borrowing rates, or “spreads”, between risk-free borrowing countries, such as Germany, and other more fragile ones, such as Italy.

The ECB argues that these "spreads" hinder the proper transmission of its monetary policy.

But strict conditions of use must be defined, the guardians of the euro not having the right to help governments budget.

This tool "may be activated to counter unjustified and disorderly market dynamics which seriously threaten the transmission of monetary policy in the euro zone", which aims for an inflation rate of 2% in the medium term, according to a press release after of the Board of Governors.

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