Instant view: ECB lifts interest rates for ninth time in a row
2023.07.27 08:52
© Reuters. FILE PHOTO: The European Central Bank (ECB) logo in Frankfurt, Germany, January 23, 2020. REUTERS/Ralph Orlowski/File Photo
(Reuters) – The European Central Bankraised interest rates for the ninth consecutive time on Thursday and kept the door open to further tightening, as stubborn inflation and a growing risk of a recession pull policymakers in opposing directions.
Fighting off a historic surge in prices, the ECB has now lifted borrowing costs by a combined 425 basis points since last July, worried that excessive price growth could be perpetuated via wage rises as the jobs market remains exceptionally tight.
The ECB’s news conference takes place at 1245 GMT.
MARKET REACTION:
FOREX: The euro pared some gains slightly and was last flat at $1.108 versus $1.1126 just before the statement.
BONDS: Euro zone government bond yields fell. Germany’s 10-year Bund yield was down 5 basis points (bps) at 2.40%, having stood at 2.43% just before the ECB rate decision. Italian yields were last down 4 bps at 4.07%.
STOCKS: The broad European index edged up and was last up 1.17% %. An index of European banking stocks was up 1.24%
COMMENTS:
SAMY CHAAR, CHIEF ECONOMIST, LOMBARD ODIER, GENEVA:
“I think we are clearly reaching the peak here. I would reach the same conclusion as for the Fed yesterday, they are going to be data dependent, but if you think what we think, the data would allow them to skip, or plateau in September.”
“Christine Lagarde has one job to do to today (at the press conference) to avoid the easing of financial conditions. Softer actions have to be accompanied by harder communication. Once you’re at peak you have to talk tough, we would expect her to be very concerned about inflation etc, but in the grand scheme of things we are very close to the peak.”
MARCHEL ALEXANDROVICH, EUROPEAN ECONOMIST, SALTMARSH ECONOMICS, LONDON:
The statement looks similar to what they said in mid-June, that they have more work to do, so they are preparing markets for another move in September.
Our view has long been that the deposit rate will rise to 4%. In September they are likely to change the forward guidance.
