Euro – The ECB raises interest rates by 25 basis points, implying that rates likely have topped. Likely to Put off further hikes for now
Euro drops swiftly
Euro fell down right after the news, notably in EURUSD, as both US PPI and retail sales shocked to the higher fifteen minutes following the ECB report was delivered.
The European Central Bank opted to boost each of the three interest rates, raising the facility for deposits to four percent. The selection was made following the panel determined that a raise was necessary based on its evaluation of the inflation perspective. New information, particularly the degree of the monetary policy propagation.
Considerations for keeping restrictive monetary policies in the face of persistent inflationary issues:
Persistent inflation (starting point effects) from Germany’s intervention this past summer. Creates concern about inflation surprises to the upward.
Strong salary growth, now at five percent annually in Q2 ECB consumer forecasts revealed a modest increase in expectations for inflation.
The recent surge in oil prices may provide an obstacle to previous inflationary improvements.
Prior to the declaration, investors fully priced in a rate rise prior to the conclusion of the fiscal year. While getting it immediately. Considering only eight basis points of tightening expected, it seems that markets assume the ECB has reached the terminal rate. Which was recently referred to. However, reporters will almost certainly question Christine Lagarde for clarification.
