• NFLX
    363.05 USD -0.64%
  • NVDA
    311.79 USD -0.28%
  • META
    248.34 USD 1.09%
  • BRKA
    501198.61 USD -1.19%
  • T
    16.38 USD 0.43%
  • ADBE
    372.09 USD 0.22%
  • TSLA
    188.89 USD 4.85%
  • MMM
    101.72 USD 2.71%
  • SP500
    4193.05 USD 0.02%
  • MSFT
    321.21 USD 0.89%
  • AMZN
    115.02 USD -1.07%
  • AAPL
    174.22 USD -0.55%

ECB rates got hiked by another 50 basis points – is the CB indecisive?

The European Central Bank hiked the rates by expected 50 basis points. However, it seems it will, instead of slowing down, hike fewer times.

Thursday, the European Central Bank hiked interest rates for the 5th time in a row and said there would be another half-point increase in March. They are continuing to tighten policy even though some of their global counterparts are moving slower.

In order to stop inflation from getting out of control, the European Central Bank (ECB) has brought up its key interest rate by an unheard-of 3% in just seven months. All of that in the hopes that higher cost of borrowing will slow down demand and keep prices from going up too quickly.

As promised in December, the ECB raised the rate from 2% to 2.5% at its initial conference of the year. But it didn’t do what the Fed did and make it clear that policy tightening would slow down.

More to read: Lebanon devalues Lira by 90% – why did it take such a drastic step?

As expected, the ECB raised interest rates by 50 basis points, which is similar to what the dovish BOE did this morning when it raised rates by 50 basis points but hinted that this hiking cycle might be over. This caused the British pound to fall.

The central bank hinted a dovish spin on the way forward. The ECB said it plans to raise rates by another 50 basis points (bps) in March and will only then “evaluate the future path”.

It’s basically dovish, as during a press conference in December, Lagarde said we might see possibly three extra 50bps hikes. Now, she doesn’t think that will happen. Instead, the Governing Council expressed a shift to a meeting-by-meeting decision making.

This is a change opposed to December, when the ECB still anticipated to “raise rates significantly more because inflation is still too high and is predicted to remain higher than required”. In December it further said that “rates will still need to go up steadily and by a lot.”

You may also like: Oil ticks higher amid unrest in Middle East

The rate of underlying inflation, which is a key indicator of how stable price growth is, has been stuck at high levels not seen for decades. Wage growth, which is another key indicator of inflation, is evidently picking up speed. The job market is also tough because the unemployment rate is at a record low.

In recent weeks, policymakers have become more divided about the future of interest rates. This is because the data coming in was mixed and could support both faster and easier rate hikes. The US Federal Reserve already eased up on the hiking and raised only by 25 basis points. 

The whole ECB statement on the February 2nd can be found here

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.


Post has no comment yet.

Want add your comment? Sign up or Sign in