- The ECB boosts its main interest rate for the 10th straight time.
- Euro dips, while European stocks see a surge post-announcement.
- Key staff projections play a pivotal role in the bank’s decision-making.
The European Central Bank (ECB) made waves on Thursday, raising its main interest rate for the tenth time in a row. This bold move is an effort to counter rising inflation, even as signs of an economic slowdown emerge.
From June 2022's -0.5%, we've now seen the central bank’s primary deposit rate soar to an unprecedented 4%. What spurred this decision? Recent staff projections for the Eurozone played a part, predicting that inflation would average at 5.6% for the year, a slight jump from a prior 5.4% estimate. But they also foresee a decline to 3.2% next year.
On the other side of the coin, the bank's medium-term outlook has been slightly adjusted downwards from 2.2% to 2.1%. And, in what might be a sigh of relief for some, the bank hinted that they might be taking a break from rate hikes for a bit.
The announcement wasn't without its drama: the Euro took a nosedive, landing at $1.0686 against the dollar – a three-month low by 3 p.m. in Frankfurt. But European stocks had a moment in the sun, rallying with the Stoxx 600 index climbing by 1.1%.
The bank's Thursday hustle didn't stop there. The ECB also adjusted the interest rates for its main refinancing operations and its marginal lending facility, both going up by 25 basis points. There's a lot to unpack here, and as the dust settles, all eyes are on Frankfurt, waiting to see what the next move will be in the economic chess game.
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