July 21 (UPI) -- For the first time in 11 years, the European Central Bank raised interest rates to battle rampant inflation, moving up by a higher-than-expected 0.5 percentage point.
The bank will set its deposit rate at 0%, its main refinancing operations rate at 0.5% and the marginal lending facility at 0.75%.
The central bank, which covers 19 European countries with the euro as their currency, said the bank had held rates at historic lows with negative interest rates in the face of a continental debt crisis and then the coronavirus pandemic.
Inflation in the European Union reached 9.6% in June, driving the higher-than-expected rate hike.
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"The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalization path than signaled at its previous meeting," the central bank said in a statement.
"This decision is based on the Governing Council's updated assessment of inflation risks and the reinforced support provided by the [Transmission Protection Instrument] for the effective transmission of monetary policy."
The ECB said its emergence from negative interest rates will allow the Governing Council to make a transition to a meeting-by-meeting approach to interest rate decisions.
"The Governing Council's future policy rate path will continue to be data-dependent and will help to deliver on its 2% inflation target over the medium term," the ECB said. "In the context of its policy normalization, the Governing Council will evaluate options for remunerating excess liquidity holdings."
The ECB also approved the Transmission Protection Instrument, a bond-buying tool aimed at protecting nations with high debt.
The European Central Bank had hinted at increasing rates in July and September as consumer prices continued to jump but they did not indicate by how much.
