Breaking: ECB hikes key rates by 75 basis points in October as expected

The European Central Bank (ECB) announced on Thursday that it raised its key rates by 75 basis points (bps) following the October policy meeting as expected. 

With this decision, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 2%, 2.25% and 1.5% respectively.

Follow our live coverage of the market reaction to the ECB's policy announcements.

Market reaction

With the initial reaction, the EUR/USD pair came under modest bearish pressure and was last seen losing 0.63% on the day at 1.0015.

Key takeaways from policy statement

"With this third major policy rate increase in a row, the governing council has made substantial progress in withdrawing monetary policy accommodation."

The Governing Council decided to adjust the interest rates applicable to TLTRO III."

Inflation remains far too high and will stay above the target for an extended period."

"ECB stands ready to adjust all of its instruments within its mandate."

"The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the app for an extended period of time past the date when it started raising the key ecb interest rates."

"In any case, the Governing Council will regularly assess how targeted lending operations are contributing to its monetary policy stance."

"Governing Council took today’s decision, and expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target."

"From 23 November 2022 until the maturity date or early repayment date of each respective outstanding TLTRO III."

"Governing Council will base the future policy rate path on the evolving outlook for inflation and the economy, following its meeting-by-meeting approach."

"Governing Council also decided to offer banks additional voluntary early repayment dates."

"Governing Council also decided to change the terms and conditions of the third series of targeted longer-term refinancing operations."

"Governing Council’s monetary policy is aimed at reducing support for demand and guarding against the risk of a persistent upward shift in inflation expectations."

"Governing council will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio."

"In view of the unexpected and extraordinary rise in inflation, it needs to be recalibrated to ensure that it is consistent with the broader monetary policy normalisation process."