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

[BumRushDaShow]

Last edited Thu Mar 16, 2023, 11:14 AM - Edit history (1)

Source: CNBC

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

The ECB had signaled for several weeks that it would be raising rates again at its March meeting, as inflation across the 20-member region remains sharply above the targeted level. In February, preliminary data showed headline inflation of 8.5%, well above the central bank’s target of 2%.

Some market players questioned whether President Christine Lagarde would still go ahead with the move, given recent shocks in the banking sector. Credit Suisse shares tumbled by as much as 30% in Wednesday intraday trade, and the whole banking sector ended the Wednesday session down by about 7%.

“Inflation is projected to remain too high for too long. Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points,” the ECB said in a statement. One basis point is equal to 0.01%. This latest move brings the bank’s main rate to 3%. It was in negative territory before July last year.

Read more: https://www.cnbc.com/2023/03/16/ecb-rate-decision-march-meeting-lagarde-announces-new-rate-hike.html

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Article updated.

Original article -

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

The ECB had signaled for several weeks that it would be raising rates again at its March meeting, as inflation across the 20-member region remains sharply above the targeted level. In February, preliminary data showed headline inflation of 8.5%, well above the central bank’s target of 2%.

Some market players questioned whether President Christine Lagarde would still go ahead with the move, given recent shocks in the banking sector. Credit Suisse shares tumbled by as much as 30% in Wednesday intraday trade, and the whole banking sector ended Wednesday’s session down by about 7%.

“Inflation is projected to remain too high for too long. Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points,” the ECB said in a statement. This latest move brings the bank’s main rate to 3%. It was in negative territory before July last year.

[IronLionZion]

1. US is likely to do the same next week

we'll see. Long term treasury bonds are traditionally a conservative investment, but rising rates just wrecked some banks who thought bonds would balance their tech sector risk.

[mathematic]

2. Rates declined signficantly due to the bank crisis, improving the value of those assets

This kind of negative feedback is a feature of the banking reforms that came out of the GFC.

I don't think rates will be going back up to their recent highs any time soon, even with a 25bps hike. Markets are predicting an 80% chance at 25bps. The fed doesn't like to surprise so expect that to be the number unless we get more bank instability before the meeting.

[IronLionZion]

3. Yep, I expect 25 next week and 25 in May

slow and steady like a tortoise