The European Central Bank (ECB) has raised interest rates half a point, in Line with ex plansdespite recent health concerns of Which banks caused market unrest.
European Central Bank President Christine Lagarde and her colleagues raised the main Refinance rate From 3% to 3.5%, marked with second sequential half point increase .
The European Central Bank is first main mainframe bank to arouse interest rate decision after the collapse of Silicon Valley Bank, the US Federal Reserve (Fed) and Bank of England set to make them decisions soon.
“The board is watching current market Tensions closely and ready to respond when necessary to maintain them price stability f financial stability in euro area, said the European Central Bank in a permit. “euro area That the banking sector be resilient, with Strong centers of capital and liquidity.
Meltdown last week of Silicon Valley Bank in The United States raised concerns about pressure across the banking sector and sent shares in diving, with Credit Suisse, which has long been troubled problemsin the center of Defeat in Europe.
Now it was the European Central Bank set To reconcile its credibility in the fight against inflation with the need for maintenance financial stability in the face of The vast majority of disturbances are imported.
The complexity of its central task bank for 20th countries that use The currency was the euro already committed to raising its deposits rate by 50 basis points to 3% on Thursday.
“Unless the ECB sees inflation expectations significantly different from it one A week ago, anything but 50 basis points move Will be big mistake Danske Bank economist Pete Heinz Christiansen said earlier.
The inflation rate in the eurozone is 8.5%. in February, below he’s talking of last But fall way above the ECB’s 2% target, and expectations are likely to hold remain grim.
Despite expectations for The main inflation will be reduced due to the decline in Energy prices new The numbers will continue show price growth Much higher than the target in 2024 and a little bit over in 2025, source with Direct knowledge told Reuters.
Meanwhile, expectations for Core inflation, an index of Durability of price growthwe are set To be raised, which indicates that inflation will be prolonged and monetary policy you will have to remain narrow for sometimes.
This view is very disturbing before the Troubles in In the banking sector, many policy makers also advocated rate The increases continue after March.
cold feet?
However, the markets were suspicious of the ECB resolve And I called back bets on the size of Thursday move and then rate walking long distances. money market Pricing indicates investors now see 40-45% chance of an increase of 50 basis points, down than 100% last week but still 20% higher in price one a point on Wednesday.
The fluctuations come as Credit Suisse said it would borrow up To $54 billion from the Swiss National Bank to shore up liquidity then share price The recession intensified concerns about A.J global banking crisis.
Some have argued that banking pressures have been great enough for The ECB should let go of its guidance and demand back tighten plans.
Current developments qualify as “extremist” in Our view is justified for re-evaluation of Our European Central Bank callWe assign a 20% probability of a no-rise, a 60% probability of a 25 basis point increase, and a 20% probability of a 50 basis point rise.
Even if the European Central Bank goes through with it with Rising 50 basis points, it is almost certain that move away from current practice of pointing to next step And he will leave the door open regarding the May meeting, even if there is a bias for higher rates remains.
Lagarde will almost certainly try to reassure investors about health of Block banks, arguing that they are better capitalized, more profitable and more Liquid compared to previous periods of disturbance.
But the ECB is likely to stop selling of Provide specific measures to help Banks, especially since then just removed Subsidy from a critical Liquidity facilities to wean off lenders off middle bank cash.
Lagarde can signal The European Central Bank is ready for that step in should Contagion start harmful of Lenders in the euro area, thus blocking the European Central Bank cash policy to be published effectively.
“The ECB will take care to adhere to the principle of decoupling: money management policy position on achieving the inflation target. And using last tools to deal with financial BNP Paribas said. Interest rates are likely wrong Liquidity processing tool problem. “
