The European Central Bank raised Interest Rates by a Quarter of a percentage point Thursday, judging that Inflation remains too High ;
even as data points to a deepening economic downturn in the 20 countries that use the euro. The move takes the benchmark rate in the euro area to 3.75%, the highest since October 2000.
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The ECB hiked interest rates for the 10th consecutive time on September 14th and signaled that it is likely done tightening policy, as inflation has started to decline but is still expected to remain too high for too long. Consequently, the main refinancing operations rate reached a 22-year high of 4.5%, and the deposit facility rate set a new record at 4%. According to the September ECB staff macroeconomic projections for the Euro Area, average inflation is forecasted to be at 5.6% in 2023 and 3.2% in 2024, both higher than previous estimates, primarily due to an elevated path for energy prices. In contrast, the 2025 rate projection has been cut to 2.1%.
-The European Central Bank kept interest rates at multi-year highs during its October meeting, marking a significant shift from its 15-month streak of rate hikes and reflecting a more cautious "wait-and-see" stance among policymakers, influenced by the gradual easing of price pressures and concerns about an impending recession. This decision follows a series of ten consecutive rate increases since July 2022, which elevated the main refinancing operations rate to a 22-year high of 4.5% and the deposit facility rate to an all-time record of 4%. The central bank stated its determination to ensure that inflation returns to its 2% target over the medium term, saying it will maintain interest rates at these high levels for a sufficiently extended period until it achieves that objective.
ECB & BoE Push Back Against Rate Cuts Expectations
The ECB and BoE left interest rates ( ECONOMICS:EUINTR & ECONOMICS:GBINTR ) at multi-year highs while committing to sustain these restrictive levels for as long as needed. This stands in contrast to the US Federal Reserve, which unexpectedly signaled yesterday its intention to implement three 25bps rate cuts in 2024 for ECONOMICS:USINTR
The European Central Bank kept interest rates unchanged at record-high levels during its first meeting of 2024 and pledged to maintain them at sufficiently restrictive levels for as long as necessary to bring inflation back to its 2% target in a timely manner, despite concerns about a looming recession and a gradual easing in inflationary pressures. The main refinancing operations rate remained at a 22-year high of 4.5% for a third consecutive time, while the deposit facility rate held steady at an all-time record of 4%. During the central bank's press conference, President Lagarde told reporters that officials unanimously concurred that it was premature to engage in discussions regarding interest rate cuts. The ECB concluded its rapid rate-hiking cycle in September, but it has sustained a somewhat hawkish stance due to persistent underlying price pressures within the Eurozone and uncertainties stemming from geopolitical tensions, including the Red Sea blockade.
The ECB kept interest rates at record-high levels during the March 2024 meeting, in line with market expectations, and reinforced that borrowing costs will remain elevated for as long as necessary. At the same time, the central bank acknowledged inflation is falling faster than anticipated and revised inflation and growth forecasts lower for this year.
The European Central Bank maintained interest rates at record-high levels for a fifth consecutive time during its April meeting, with the main refinancing operations rate remaining unchanged at a 22-year high of 4.5% and the deposit facility rate holding at an all-time record of 4%. The bloc's central bank also said it may consider reducing the level of policy restriction, if it becomes more confident that inflation is moving steadily toward the 2% target. Officials also acknowledged that inflation has continued to decline, with most measures of underlying inflation and wage growth easing. However, they cautioned that domestic price pressures remain strong, leading to high services price inflation. During the central bank's press conference, President Lagarde told reporters that the ECB is not pre-committing to a particular rate path, and future moves will be data-dependent.
Feels like the last hike. What's next? Rate cuts to 0 again.
Mr_J__fx
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@T-r-X I don't have a crystal ball to predict the future, however, having Rates cut to 0% seems as mission impossible from here. Inflation is still very high for rates to be cut to 0% and Inflation being higher from here is a Concern with the Oil cuts from OPEC+ with the incoming winter ahead . Note that Rates being cut to 0% during Pandemic anomaly BSE took place to ease the unknown and Inflation was not high pre-pandemic. Our best guess and move would be to remain patient until the next one and trade the markets for what charts tell . Keeping an eye to economics and fundamentals is a huge plus for a trader to know the markets conditions and help them with their decision making based in facts and not emotions
T-r-X
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@Mr_J__fx, Inflation during pandemic was supply driven, not demand driven. Deflation is next for Europe, same story as Japan. Average Debt to GDP of EU countries: 91.6% of GDP. Lower yields needed to service this debt.
Mr_J__fx
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I agree with the inflation point , and this will take a while to 'normalize' if it will . The funny thing is that this debt (wether EU or US) will never be resolved, as the frenzy global economic system is based on debt and interest rates which is a causation of Fiat coming into existence or withdrawn from it. This is certainly not the way to go for prosperity of the masses but the 1% only. The wicked game they have created is for its sole purpose to enrich the rich and deepen the poor even more in poverty. This is total domination and control in terms of Hierarchy. It doesn't matter to them wether you and I are multi millionaires or whatever that, we are still peasants to their system and a joke.
Thanks for post mate