Government promises to work to alleviate the impact of rising interest rates

This was the tenth consecutive interest rate hike by the central bank

The Government today promised to work, particularly within the scope of the State Budget for 2024, to “lessen the impacts” of rising interest rates on families and companies, following a new increase decided by the European Central Bank (ECB).

«We hope and will work to reduce these impacts on the lives of citizens, companies, the economic life of the country and it is in this direction that we have been working now and also in the State Budget», said Finance Minister Fernando Medina.

Speaking to Portuguese journalists at the entrance to the informal meeting of European Finance Ministers, in the Spanish city of Santiago de Compostela as part of Spain's presidency of the Council of the EU, the government official admitted that "it is a fact that this decision by the ECB poses very important, […] a slowdown in growth is expected, as a result of the policy to combat inflation».

«I had the opportunity to say that, at this moment, a rise in interest rates would be a greater risk to the progress of the economy than not having done so», he pointed out.

Fernando Medina said that the tight monetary policy and its impact “will be one of the fundamental points of our debate and meeting, [about] how this recent decision by the central bank will impact the progress of the economy in 2023, but especially in the year 2024».

The position comes after, on Thursday, the ECB announced a new increase in the three key interest rates by 25 basis points, as in the previous meeting, placing the deposit rate at the highest level ever in the euro zone.

In the statement released after the Board of Governors' monetary policy meeting, the ECB informs that the interest rate applicable to main refinancing operations and the interest rates applicable to the marginal lending facility and the deposit facility will be increased to 4,50%, 4,75% and 4,00%, respectively, with effect from September 20th.

This was the tenth consecutive interest rate hike by the central bank, which has increased interest rates by 450 basis points since July last year, the fastest rising cycle in the history of the euro zone.

The inflation rate has been falling in recent months after recording historic values ​​due to the reopening of the economy post-covid-19 pandemic, the energy crisis and the economic consequences of the war in Ukraine, but still above the 2% target set. ECB for price stability.

To achieve this, the ECB has tightened monetary policy with successive increases in interest rates, now at a slower pace, a situation that has led to lower consumption.

Given this scenario, euro zone finance ministers will today discuss the macroeconomic context in the single currency area, and must insist on commitments to budgetary prudence.