The European Central Bank raised interest rates again. There was no sense, everything was as planned

interest rates in the area euro They climb again. On Thursday, October 27, the European Central Bank raised it by 75 basis points. This means that the refinancing rate rises to 2% and the deposit rate to 1.50%. This is the highest level in nearly 14 years.

The ECB’s decision on the increase was not surprising – the central bank made it clear earlier. The rate hike metric isn’t surprising either – the market expected a rate hike of 75 basis points. “Any further decision would be a huge surprise to the market,” Bekao economists wrote in the morning.

Thursday’s rate hike is the third in a row in the eurozone and the second in a row by 75 basis points. The cycle of increases began in July of this year. 0% for the refinancing rate and -0.50 percent. for the deposit price.

The next decision-making meeting of the European Central Bank will be held on December 15 this year.

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European Central Bank raises interest rates, what next?

While a rate hike in the Eurozone was more than certain, and its scale – 75 basis points – highly likely, the market is waiting more for what Christine Lagarde, President of the European Central Bank, will have to say.

The point is that the major central banks have recently started days Less stressed signals flow. There was a leak – data permitting – the US Federal Reserve will slow the pace of interest rate hikes in December. At the beginning of October, “only” by 25 basis points, not by 50 basis points as expected (and what the measure of the previous four highs was), rates in Australia rose.

In turn, the Central Bank of Canada added a smaller-than-expected rise last Wednesday – by 50 basis points, not 75 basis points. Despite persistent inflation (including core inflation), the Bank has begun to focus more on concerns about economic growth. The Bank of Canada lowered its GDP growth forecast for 2022-2024.

The European Central Bank is less advanced in the cycle of increases, and inflation in Europe has not yet reached the tipping point. Fiscal policy here also plays a much larger role than in the United States and Canada, which must be treated as energy sources with all their consequences. A similar shift will occur in the eurozone, but it is too early for that

Pekao economists wrote in their morning commentary. The inflation rate in the euro area in September was 9.9%. Not only was it the highest in the study’s history, but it was also clearly higher than a month earlier (9.1%).

Canada raised interest rates, but less than expected. This could be an important signal

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