European Central Bank hikes rates 50 basis points despite banking turmoil
by 50 basis points on Thursday as promised to curb inflation, ignoring financial market chaos and calls by investors to dial back policy tightening at least until sentiment stabilizes.has been raising rates at its fastest pace on record, but a rout in global markets since the collapse of Silicon Valley Bank in the United States last week had threatened to upend those plans at the last moment.
“The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area,” she said, adding that the region’s banks had strong capital and liquidity positions.But the statement offered no commitments for the future, despite previous calls by a long list of policymakers for more big moves in the fight against inflation.
“We know that if our baseline were to persist when the uncertainty reduces, then we have a lot more ground to cover,” Lagarde said. “But it’s a big caveat, ‘if our baseline was to persist’,” she added, noting that it was currently impossible to determine the future path of interest rates.The euro and bond yields edged up after the move. Earlier, after days of turmoil in markets, financial investors had seen a 50 per cent chance of a smaller, 25 basis point move by the ECB and dialed down expectations for future moves.
Euro zone bank shares have been in freefall this week, spooked first by SVB’s collapse, then a plunge in the value of Credit Suisse, a lender that has long been dogged by problems.
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