MNI BRIEF: ECB Hikes Rates 25bps, Tweaks Reserve Remuneration

The European Central Bank raised its key interest rates by 25 basis points on Thursday, pushing the rate on the benchmark deposit rate to 3.75%, the highest since spring 2001.

The refi rate and the minimum lending facility rates rose to 4.25% and 4.5% respectively, in a decision widely expected by financial markets.

There was no clear guidance to future policy moves in the statement, beyond the Governing Council saying future decisions "will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to the 2% medium-term target". The ECB will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction, the statement added.(MNI ECB WATCH: Data Key To Next Move After July's Likely Hike)

In a move the ECB said would ensure the timely and effective transmission of policy decisions, it set the remuneration of minimum reserves at 0%. The move will also improve the efficiency of monetary policy by reducing the overall amount of interest that needs to be paid on reserves in order to implement the appropriate stance, the statement said.