ECB Pushes Rates 50 Basis Points Higher

The European Central Bank (ECB) raised its benchmark rate by 50 basis points today, as was broadly expected.

In explaining its decision, the ECB said that the underlying inflation pressures will necessitate another 50 basis points at its next monetary policy meeting in March

After that, the ECB will evaluate its monetary policy, and review the data, with the expectation that it will be keeping interest rates at restrictive levels as it looks to tamp down persistent inflation.

Christine Lagarde, President of the ECB, said they expect economic activity to remain muted due to significant headwinds along with Russia’s war with Ukraine.

According to Eurostat’s flash estimate, inflation was 8.5% in January or 0.7 percentage points lower than the December figure. The slight decline was due to a drop in energy prices. Food price inflation increased to 14.1% as challenging inputs continued to push prices higher.

The Governing Council is expected to raise rates at a steady pace and in keeping them at levels that are sufficiently restrictive to return inflation to the 2% objective.

The ECB’s decision was joined by the US Federal Reserve and Bank of England both raising rates as the world battles rising prices.

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