European Central Bank hikes rates 50 basis points despite banking turmoil
Global News
The European Central Bank forged ahead with a half-percentage-point increase to its benchmark interest rate on Thursday amid global banking uncertainty.
The European Central Bank raised interest rates by 50 basis points on Thursday as promised to curb inflation, ignoring financial market chaos and calls by investors to dial back policy tightening at least until sentiment stabilizes.
The ECB has been raising rates at its fastest pace on record, but a rout in global markets since the collapse of Silicon Valley Bank (SVB) in the United States last week had threatened to upend those plans at the last moment.
In line with its often-repeated guidance, the central bank for the 20 countries that share the euro lifted its deposit rate to three per cent, the highest level since late 2008, as inflation is seen overshooting its two per cent target through 2025.
“Inflation is projected to remain too high for too long,” ECB President Christine Lagarde told a news conference, reading from the statement agreed by the bank’s policymakers.
“The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area,” she said, adding that the region’s banks had strong capital and liquidity positions.
But the statement offered no commitments for the future, despite previous calls by a long list of policymakers for more big moves in the fight against inflation.
“We know that if our baseline were to persist when the uncertainty reduces, then we have a lot more ground to cover,” Lagarde said.
“But it’s a big caveat, ‘if our baseline was to persist’,” she added, noting that it was currently impossible to determine the future path of interest rates.