European Central Bank (ECB) plans three rate hikes Decided to cut key interest rates by 50 basis points (0.5%) as part of the ongoing fight against inflation. The organization said further rises were likely “because inflation is still very high and projected to remain above target for too long”.
ECB follows Federal Reserve to raise interest rates by 50 basis points
The European Central Bank (ECB) has outlined its economic policies in fighting inflation. The Institution’s Board of Directors has decided to increase interest rates across all major refinancing operations, marginal lending facilities and deposit facilities by 50 basis points (bps). In a press release, the organization said the rise was part of a plan to ensure a “timely return” to the 2% level of inflation previously faced by the bloc. I explained.
This increase is similar to what the US Federal Reserve applied when he raised interest rates by 50bps on December 14th.
Inflation is still far from reaching his 2% target as figures estimate inflation reached 10% during November. However, this represents an improvement over the October figure, which was estimated to reach 10.6%.
The ECB has hinted at similar rate hikes in the future, stating, “Inflation remains very high and is projected to stay above target for too long, so it is unlikely that there will be further increases.” I look forward to it,” he said.
Recession Likely
A recession could also occur in Europe as a result of measures convened and applied by the ECB. The Eurosystem, an institution united by the ECB and other central banks in the region, forecasts a possible recession to be relatively “short-lived and shallow”. Nevertheless, the ECB warned of the relative weakness of the economy over the next few years.
The Eurozone economy could contract this quarter and next due to the energy crisis, high uncertainty, weakening global economic activity and tightening funding conditions. The
organization also announced that it will wind down its Asset Purchase Program (APP) starting next November. This is the impact on the fixed income market that certain analysts expected. The APP portfolio will be reduced by €15 billion each month until the end of the second quarter of 2023. However, the Pandemic Emergency Purchase Program, which allows the ECB to purchase various types of assets on the financial markets, is at least
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