ECB Raises Rates Another 25bps, Highest Level Since July 2008

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    Helmholtz Watson

    ECB raised key rates by 25 bps in its May monetary policy decision following a 50-bps rate hike last meeting, and matching expectations from most anal
    [See the full post at: ECB Raises Rates Another 25bps, Highest Level Since July 2008]


    Lagarde opening statement:

    The inflation outlook continues to be too high and too long
    Incoming information broadly supports medium-term outlook that we formed at our previous meeting
    We will continue to follow a data-dependent approach
    Private domestic demand, especially consumption, is likely to remain weak
    Business and consumer confidence have improved but are lower than pre-war
    Manufacturing sector is working through a backlog of orders but prospects worsening
    Government should roll back energy support measures promptly as energy crisis fades
    Price pressures remain strong
    Inflation is still being pushed up but the gradual pass through of previous energy price rises
    Lagarde no longer says growth risks are to the downside


    The market is pricing in 43 bps of hiking in September and then coming down afterwards.


    Lagarde Q&A:
    We know that we have more ground to cover
    25 bps hike had almost unanimous support
    All governors determined to tame inflation
    Mood was very focused and attentive to all data
    We have covered a lot of ground… we are continuing this hiking process
    This is a journey, we have not arrived yet
    Some governors suggested 50 bps was appropriate, some said 25 bps but none said no change
    There was a very strong consensus around the path we chose
    Reports from corporates regarding borrowing suggest to us that rates are restrictive


    De Guindos: Regional banks share business model but it’s not applicable to European banking industry

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