The European Central Bank (ECB) has raised interest rates again in the fight against sky-high inflation. The three main interest rates will be raised by 0.75 percentage points. This is as big a step as the previous rate hike in September. Interest rates have already risen by two percentage points in three months, making it the sharpest and most aggressive rate hike ever in ECB history.

By raising interest rates, the central bank hopes that economic growth will slow down and that price increases will weaken in the long term. In the Netherlands, inflation peaked at 17.1 percent in September, mainly due to high energy prices. In all euro countries together, inflation averages 9.9 percent.

According to the ECB, inflation has been too high for some time. In recent months, higher energy and food prices, supply shortages and the recovery in consumer demand following the coronavirus pandemic have further fueled inflation. Usually, a higher interest rate only affects prices after 9 to 12 months.

All types of interest are directly and indirectly dependent on the ECB’s policy rate, such as mortgage interest, credit and loan interest, student loans, bond interest and of course savings interest. These interest rates have already increased recently.

Due to the gradual interest rate hikes by the ECB, interest rates for consumers are also rising again. For years it was close to zero percent, but in recent weeks the big three banks have announced that it will rise to 0.25 percent by December.

That’s still a lot less than the 1.5 percent interest that banks now get from the ECB when they invest there. According to the comparison site Geld.nl, the main reason that the big banks are only increasing interest rates to a limited extent is that they already have a lot of savings and little competition.

“The fact that banks have issued many mortgages at very low mortgage interest rates in recent years also plays a role,” says Amanda Bulthuis from Geld.nl. “They now earn little with it, so they have less leeway to significantly increase the savings rate.” She expects that the interest rate hike by the ECB will further increase the pressure on the big banks to raise their interest rates further.