14.2 C
Los Angeles
Thursday, March 30, 2023
- Advertisement -

European Central Bank hikes rates despite market turmoil, pledges support if needed

BusinessEconomyEuropean Central Bank hikes rates despite market turmoil, pledges support if needed
- Advertisement -

Christine Lagarde, President of the European Central Bank (ECB), pauses during a rates decision news conference in Frankfurt, Germany, Thursday, March 16, 2022.

Alex Cross | Bloomberg | Getty Images

European Central Bank announced another rate hike of 50 basis points on Thursday, signaling that it stands ready to supply liquidity to banks if needed, amid recent turmoil in the banking sector.

- Advertisement -

The ECB had signaled for several weeks that it would raise rates again at its March meeting, as inflation in the 20-member region remained sharply above target levels. In February, preliminary data showed Headline Inflation 8.5%Well above the central bank’s target of 2%.

Some market players asked whether the President Christine Lagarde Given the recent tremors in the banking sector, we will still go ahead with this move. credit Suisse Shares fell up to 30% in Wednesday’s intraday trade, and the entire banking sector declined about 7% in Wednesday’s session.

“Inflation is expected to remain very high for a very long time. Therefore, the Governing Council today decided to increase the ECB’s three key interest rates by 50 basis points each,” the ECB said in a statement. One basis point is equal to 0.01%.

This latest move brings the Bank’s key rate to 3%. It was in negative territory before July last year.

“The Governing Council is closely monitoring current market tensions and stands ready to respond as necessary to preserve price stability and financial stability in the euro area,” the central bank said in a statement. Euro area banking sector is resilient, capital strong And with the liquidity position.” Same statement.

Initial pressure on the banking sector emerged last week, when US officials considered Silicon Valley Bank Bankrupt. The event rattled the bank’s international subsidiaries and raised concerns about whether central banks are raising rates too aggressively. Goldman Sachs sharply adjusted its rate expectations for the Federal Reserve, due to meet next week – the bank now expects a 25 basis point hike, after previously forecasting a 50 basis point hike.

European officials wanted to emphasize that the situation in Europe was different from that of the United States. Overall, deposit density is low — svb Deposit flows appear to have stabilized, and European banks remain well-capitalised since regulatory changes following the global financial crisis – was a significant lender to the tech and healthcare sectors.

Equity action on Thursday showed some respite in the banking sector after Credit Suisse said it would borrow up to $54 billion from the Swiss National Bank.

‘I was in 2008’

President Lagarde was keen to emphasize that the recent market turmoil is different from the turmoil that occurred during the 2008 global financial crisis.

“The reforms that have taken place, and I was around in 2008, so I remember clearly what happened and what we had to do, we reformed the framework, we agreed on Basel III. [a regulatory framework]We increased the capital ratio…the banking sector is currently in a much stronger position,” Lagarde said during a press conference.

“Additionally, if it is needed, we have the equipment, we have the facilities available, and we have a toolbox with other tools that we are always ready to activate when the need arises.” he said, reiterating that the central bank is ready to step in if necessary.

vowed to bring down inflation

The ECB also revised down its inflation expectations on Thursday. It now sees inflation averaging 5.3% this year, followed by 2.9% in 2024. In December, the bank projected an inflation figure of 6.3% for 2023 and 3.4% in 2024.

President Lagarde said that the ECB is committed to reducing inflation.

“We are determined to bring inflation back to 2% in the medium term, there should be no doubt, the determination remains,” she said.

An open question remains: how soon will the ECB hike rates? Until the recent market volatility, expectations point to a further increase of 25 basis points in May, followed by a similar move in June.

Lagarde gave no indication of future decisions.

“We know we have a lot of ground to cover, but this is a big reminder that, if our baseline holds,” she said, “the momentum we take will be entirely data dependent.”

Source link

Hollow Knight: Silksong has done its job to top Origin’s final DLC

Originally announced in 2019, fans have been waiting a long time Hollow Knight: Silksong, Updates all around,...

T. rex’s lips may have been like those of modern lizards

in movies and TV shows, Tyrannosaurus Rex Often sports a fleet of large, pointed teeth that are almost...
- Advertisement -

Follow us

— Advertisement —

Most Popular Articles