ECB Raises Interest Rates Despite Market Fears
The European Central Bank (ECB) on Thursday raised interest rates by a half percentage point to 3 percent, sticking to its previous guidance even as fears of a new financial crisis roiled markets in recent days.[0] The decision came as the central bank acknowledged inflation is projected to remain too high for too long.[1] In its updated staff projections, the ECB said it expects inflation to average this year at 5.3%. It is predicted that consumer prices will increase by 2.9% in 2024 and 2.1% in 2025.[2]
The European Central Bank's attention remains on inflation, which is starting to decrease even as core inflation becomes a part of the larger economy.[2] In its statement, the ECB said: “The euro area banking sector is resilient, with strong capital and liquidity positions. In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.”
The central bank also revised its inflation expectations.[3] It is projected that headline inflation will average 5.3% in 2021, then decrease to 2.9% in 2024. It was forecasted by the bank in December that the inflation rate for 2023 would be 6.3%, and 3.4% in 2024.
ECB President Christine Lagarde emphasized that the central bank is not wavering in its commitment to fight inflation, saying: “We are not waning on our commitment to fight inflation and we are determined to return inflation back to 2% target in the medium term. That should not be doubted.”[1]
The European Central Bank (ECB) has raised its economic predictions, predicting an average GDP growth of 1% in the Eurozone this year.[2] It is anticipated that economic growth will increase by 1.6% in 2024 and 2025.[2] The European Central Bank (ECB) issued a statement to allay any worries regarding the potential spread of contagion in the banking sector. The ECB declared that the banking sector in the euro area is robust with high capital and liquidity levels. The Bank also made it clear that it has the necessary instruments to supply liquidity to the euro area financial system if needed and ensure the effective implementation of monetary policy.
The European Central Bank (ECB) on Thursday raised interest rates by a half percentage point, pressing ahead with its fight against inflation despite concerns that this could exacerbate strains in the financial system.[4]
0. “ECB keeps eye firmly on inflation amid banking crisis fears” POLITICO Europe, 16 Mar. 2023, https://www.politico.eu/article/ecb-lifts-rates-by-half-a-percent-amid-financial-market-turmoil/
1. “ECB raises eurozone interest rate despite banking sector fears” The Guardian, 16 Mar. 2023, https://www.theguardian.com/business/2023/mar/16/ecb-raises-interest-rates-despite-banking-fears-credit-suisse
2. “ECB pushes forward with 50 basis point rate hike and monitoring market tensions” Kitco NEWS, 16 Mar. 2023, https://www.kitco.com/news/2023-03-16/ECB-pushes-forward-with-50-basis-point-rate-hike-and-monitoring-market-tensions.html
3. “European Central Bank hikes rates despite market mayhem, pledges support if needed” CNBC, 16 Mar. 2023, https://www.cnbc.com/2023/03/16/ecb-rate-decision-march-meeting-lagarde-announces-new-rate-hike.html
4. “European Central Bank sticks to its rate-hiking guns, says banks ‘resilient'” CNN, 16 Mar. 2023, https://www.cnn.com/2023/03/16/economy/european-central-bank-interest-rates/index.html
