The European Central Bank (ECB) is raising interest rates significantly – by 0.75 percentage points.

The central bank announced this on Thursday after the October monetary policy meeting of the ECB Council.

This increases the actual key interest rate, the main refinancing rate, to around 2 percent.

Christian Siedenbiedel

Editor in Business.

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This is the ECB's third rate hike in a row.

In July, the central bank raised interest rates for the first time in eleven years, by 0.5 percentage points.

A sharp interest rate hike of 0.75 percentage points followed in September.

The next interest rate meeting is now scheduled for December – then further interest rate hikes could encounter stronger resistance.

Critical statements had recently been made by Italy's new Prime Minister Giorgia Meloni, among others, who pointed out the difficulties caused by higher interest rates for indebted states, families and companies.

This time, however, there still seems to have been a clear majority in the Governing Council for a sharp increase in interest rates.

Bundesbank President Joachim Nagel had also drummed for it.

He called persistent higher inflation the "greatest destroyer of wealth".

But even the hawks, i.e. the advocates of tighter monetary policy on the committee, have probably not demanded an increase of a full percentage point, as emphasized Frederik Ducrozet, economist at Bank Pictet.

ECB President Christine Lagarde and the other Council members are facing the highest inflation in the history of the European Monetary Union.

Unlike in the United States, the inflation rate in the euro area continues to rise and reached 9.9 percent in September.

According to estimates by many economists, it should even reach double digits in October and initially remain of this magnitude.

Significant effects of interest rate hikes on inflation are only likely to be felt with a certain time lag - at the moment the central bank is initially struggling to ensure that the high inflation does not get stuck in people's minds and is solidified by higher inflation expectations.

In a recent discussion with economists Paul Krugman and Larry Summers, ECB Executive Board member Isabel Schnabel raised the issue that what the ECB is doing now is not yet having an impact on winter inflation.

Summers said: Yes, it's like an old hotel - where you turn on the faucet when you shower, but unfortunately the temperature reacts with a delay.

There are apparently several reasons for the different development of inflation in the United States and the euro area: The roots of inflation are different: In America, demand plays a greater role in inflation, in Germany the supply bottlenecks are driving inflation to a greater extent.

In addition, the impact of the Ukraine war on energy supply varies, the United States can rely more on its own sources of oil and gas.

However, the Frankfurt economics professor Volker Wieland thinks it is possible that the faster reaction of the American central bank Fed compared to the ECB also plays a role: "The central bank reacted more decisively there, so that one can see an initial reaction of the inflation expectations."