Ecb Introduces A 50 Bps Rate Hike Amid Inflation Fears

Ecb Introduces A 50 Bps Rate Hike Amid Inflation Fears by Ashly Chole last updated on March 27, 2023

ECB Introduces A 50 BPS Rate Hike Amid Inflation Fears

The European Central Bank has finally introduced a new rate hike of 50 basis points today! It appears that the fight against inflation is much more important than the current banking crisis.

After the whole issue with Credit Suisse and the fall of a few US banks, there were rumors that the ECB would skip the rate hike during this meeting.

But after the latest rate hike, all of these rumors are put to rest as it appears that inflation remains the number one priority of the ECB.

ECB Pushes The Interest Rate To 3.50%

After the recent increase, the interest rate of main refinancing operations has become 3.50%. Similarly, the deposit facility rate of the ECB has reached 3.0%.

The marginal lending rate in Europe has also increased after the recent rate hike and touched 3.75%.

The European Central Bank has also made it clear that it will work towards reducing its balance by 15 billion euros/month.

According to the ECB statement, the inflationary pressure will remain high for a long period of time. It appears that was the real reason why ECB decided to go ahead with rate hikes despite the recent banking crisis.

The forecasts set by analysts show that inflation will still be above the 2% target set by ECB in 2025. Similarly, the growth forecast for the EU region has also improved, according to the reports.

For 2023, the GDP is set to grow by 1% which is higher than the initial forecasts set by the ECB.

However, the central bank didn't give any pointers about any new interest rate hike. Earlier, the ECB provided these hints through messaging.

It appears that the collapse of several banks and the near-collapse of Credit Suisse is the real reason why Bank has decided not to commit to any new rate hike for now.

Fundamentally speaking, this new rate hike will be bullish for the Euro and thus will improve its situation against other currencies.