The European Central Bank (ECB) has taken a big step in raising interest rates by 50bp (1bp = 0.01%p).
“Inflation is expected to remain high for too long,” the ECB said in a statement on the 16th (local time). “Today, the board of directors decided to raise interest rates by 50 basis points in line with the goal of timely return of inflation to the mid-term target of 2 percent,” he said.
“The Council is closely monitoring current market tensions and is ready to respond as necessary to maintain price stability and financial stability within the euro area,” the ECB said. Euro-regional banks are resilient with strong capital and liquidity,” he said.
The ECB added, “If necessary, it is fully equipped to provide liquidity support to the eurozone’s financial system and to maintain smooth delivery of monetary policy.”
Along with the announcement of the key interest rate hike, the ECB predicted that inflation will fall to 2.9% next year and 2.1% in 2025 after hitting 5.3%. Core inflation, excluding volatile energy and food, is also expected to decrease to 4.6% this year, 2.5% next year, and 2.2% in 2025, the ECB said.
Meanwhile, the ECB’s announcement drew market attention in that it was the first rate hike by a major institution after concerns emerged that Credit Suisse (CS), Switzerland’s second-largest bank, could go bankrupt.
Following the bankruptcy of the Silicon Valley Bank (SVB) and the Signature Bank of New York, rumors of a crisis in Europe led to the US Federal Reserve System (Fed) to freeze its key interest rate, but the Fed’s interest rate calculation method is expected to become more complicated.
