The European Central Bank (ECB) announced the latest interest rate decision on Thursday (8th), sharply raising interest rates by 3 yards (75 basis points), in line with market expectations, and to ensure that inflation returns to the central bank’s 2% level, suggesting that further interest rate hikes may follow . The last time the ECB raised rates this much was in 1999.
After the ECB raised interest rates by 3 yards, the marginal lending rate was 1.5%, the main refinancing rate was still 1.25%, and the deposit mechanism rate was 0.75%.
It is worth noting that following this rate hike, the deposit mechanism interest rate was positive for the first time since July 2012, symbolizing that the European Central Bank is heading for the era of “interest rate normalization” once more this month following the “one-step” exit from negative interest rates at the July meeting. step forward. Meanwhile, the pace of asset purchases under the ECB’s Pandemic Emergency Purchase Program (PEPP) will continue at least until the end of 2024.
The ECB said in a statement that future policy rate decisions by the Governing Council will continue to be data-dependent and follow a meeting-by-meeting approach, with further rate hikes expected at the next few meetings.
In addition, the European Central Bank also significantly raised its inflation forecast for 2022.EURThe adjusted consumer price index (CPI) is 8.1%, the previous estimate is 6.8%; the 2023 CPI is expected to be 5.5%, the previous estimate is 3.5%; the 2024 CPI is expected to be 2.3%, the previous estimate is 2.1% .
Since the beginning of this week, with the European economic situation getting worse and worse, the market once doubted whether the European Central Bank will raise interest rates by 3 yards this time, althoughEURThe regional economy might slip into recession this winter, but the ECB remains a priority to fight inflation.
However, the ECB’s statement did not mention the previously proposed anti-financial secession tool, the “Transmission Protection Instrument” (TPI), nor did it mention the plan to shrink its balance sheet. Earlier, hawkish ECB Governing Council member Klaas Knot said it was too early to discuss shrinking the balance sheet before the end of this year.
Lagarde’s press conference continues to be hawkish, saying that there will be several interest rate hikes in the future
European Central Bank President Lagarde continued to be hawkish at a later press conference. She said that interest rates will continue to be raised in the future. In addition to this rate hike, the number of interest rate hikes may be more than two but less than five times, but the rate of interest rate hikes will be 3 yards. Might not be the norm.
Lagarde predicts that inflation will continue to climb in the short term, while the rate of economic growth is expected to be significantly reduced in the short term and even through 2023.
forEURThe recent devaluation has continued, she said the ECB is paying close attention, but will notEURexchange rate targets, structural policies should only increaseEURthe growth potential of the district and support its resilience.
Lagarde’s interview with the media came as traders raised their bets on a rate hike by the European Central Bank in October, estimating a 40 percent chance of a three-point hike.